Correlation Between GlaxoSmithKline PLC and Choil Aluminum
Can any of the company-specific risk be diversified away by investing in both GlaxoSmithKline PLC and Choil Aluminum 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 GlaxoSmithKline PLC and Choil Aluminum into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between GlaxoSmithKline PLC ADR and Choil Aluminum, you can compare the effects of market volatilities on GlaxoSmithKline PLC and Choil Aluminum 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 GlaxoSmithKline PLC with a short position of Choil Aluminum. Check out your portfolio center. Please also check ongoing floating volatility patterns of GlaxoSmithKline PLC and Choil Aluminum.
Diversification Opportunities for GlaxoSmithKline PLC and Choil Aluminum
0.45 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between GlaxoSmithKline and Choil is 0.45. Overlapping area represents the amount of risk that can be diversified away by holding GlaxoSmithKline PLC ADR and Choil Aluminum in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Choil Aluminum and GlaxoSmithKline 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 GlaxoSmithKline PLC ADR are associated (or correlated) with Choil Aluminum. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Choil Aluminum has no effect on the direction of GlaxoSmithKline PLC i.e., GlaxoSmithKline PLC and Choil Aluminum go up and down completely randomly.
Pair Corralation between GlaxoSmithKline PLC and Choil Aluminum
Considering the 90-day investment horizon GlaxoSmithKline PLC ADR is expected to under-perform the Choil Aluminum. But the stock apears to be less risky and, when comparing its historical volatility, GlaxoSmithKline PLC ADR is 1.6 times less risky than Choil Aluminum. The stock trades about -0.25 of its potential returns per unit of risk. The Choil Aluminum is currently generating about -0.06 of returns per unit of risk over similar time horizon. If you would invest 169,200 in Choil Aluminum on August 28, 2024 and sell it today you would lose (16,000) from holding Choil Aluminum or give up 9.46% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 92.06% |
| Values | Daily Returns |
GlaxoSmithKline PLC ADR vs. Choil Aluminum
Performance |
| Timeline |
| GlaxoSmithKline PLC ADR |
| Choil Aluminum |
GlaxoSmithKline PLC and Choil Aluminum Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with GlaxoSmithKline PLC and Choil Aluminum
The main advantage of trading using opposite GlaxoSmithKline PLC and Choil Aluminum positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GlaxoSmithKline PLC position performs unexpectedly, Choil Aluminum 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 Choil Aluminum will offset losses from the drop in Choil Aluminum's long position.| GlaxoSmithKline PLC vs. Novartis AG ADR | GlaxoSmithKline PLC vs. AstraZeneca PLC ADR | GlaxoSmithKline PLC vs. Roche Holding Ltd | GlaxoSmithKline PLC vs. Bristol Myers Squibb |
| Choil Aluminum vs. Hankuk Steel Wire | Choil Aluminum vs. Cuckoo Homesys Co | Choil Aluminum vs. Kukdong Oil Chemicals | Choil Aluminum vs. Hanil Iron Steel |
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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.
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