Correlation Between GSK Plc and AstraZeneca PLC
Can any of the company-specific risk be diversified away by investing in both GSK Plc and AstraZeneca PLC at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining GSK Plc and AstraZeneca PLC into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between GSK plc and AstraZeneca PLC, you can compare the effects of market volatilities on GSK Plc and AstraZeneca PLC and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in GSK Plc with a short position of AstraZeneca PLC. Check out your portfolio center. Please also check ongoing floating volatility patterns of GSK Plc and AstraZeneca PLC.
Diversification Opportunities for GSK Plc and AstraZeneca PLC
0.85 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between GSK and AstraZeneca is 0.85. Overlapping area represents the amount of risk that can be diversified away by holding GSK plc and AstraZeneca PLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AstraZeneca PLC and GSK Plc is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on GSK plc are associated (or correlated) with AstraZeneca PLC. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of AstraZeneca PLC has no effect on the direction of GSK Plc i.e., GSK Plc and AstraZeneca PLC go up and down completely randomly.
Pair Corralation between GSK Plc and AstraZeneca PLC
Assuming the 90 days trading horizon GSK plc is expected to generate 1.01 times more return on investment than AstraZeneca PLC. However, GSK Plc is 1.01 times more volatile than AstraZeneca PLC. It trades about 0.02 of its potential returns per unit of risk. AstraZeneca PLC is currently generating about 0.02 per unit of risk. If you would invest 3,548 in GSK plc on August 29, 2024 and sell it today you would earn a total of 412.00 from holding GSK plc or generate 11.61% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 87.85% |
| Values | Daily Returns |
GSK plc vs. AstraZeneca PLC
Performance |
| Timeline |
| GSK plc |
| AstraZeneca PLC |
GSK Plc and AstraZeneca PLC Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with GSK Plc and AstraZeneca PLC
The main advantage of trading using opposite GSK Plc and AstraZeneca PLC positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GSK Plc position performs unexpectedly, AstraZeneca PLC can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in AstraZeneca PLC will offset losses from the drop in AstraZeneca PLC's long position.| GSK Plc vs. Dell Technologies | GSK Plc vs. Lupatech SA | GSK Plc vs. Tres Tentos Agroindustrial | GSK Plc vs. Spotify Technology SA |
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Check out your portfolio center.Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Transaction History module to view history of all your transactions and understand their impact on performance.
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