Correlation Between GlaxoSmithKline PLC and ABCO Electronics
Can any of the company-specific risk be diversified away by investing in both GlaxoSmithKline PLC and ABCO Electronics 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 ABCO Electronics 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 ABCO Electronics Co, you can compare the effects of market volatilities on GlaxoSmithKline PLC and ABCO Electronics 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 ABCO Electronics. Check out your portfolio center. Please also check ongoing floating volatility patterns of GlaxoSmithKline PLC and ABCO Electronics.
Diversification Opportunities for GlaxoSmithKline PLC and ABCO Electronics
0.74 | Correlation Coefficient |
Poor diversification
The 3 months correlation between GlaxoSmithKline and ABCO is 0.74. Overlapping area represents the amount of risk that can be diversified away by holding GlaxoSmithKline PLC ADR and ABCO Electronics Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ABCO Electronics 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 ABCO Electronics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ABCO Electronics has no effect on the direction of GlaxoSmithKline PLC i.e., GlaxoSmithKline PLC and ABCO Electronics go up and down completely randomly.
Pair Corralation between GlaxoSmithKline PLC and ABCO Electronics
Considering the 90-day investment horizon GlaxoSmithKline PLC ADR is expected to generate 0.46 times more return on investment than ABCO Electronics. However, GlaxoSmithKline PLC ADR is 2.18 times less risky than ABCO Electronics. It trades about -0.12 of its potential returns per unit of risk. ABCO Electronics Co is currently generating about -0.19 per unit of risk. If you would invest 4,333 in GlaxoSmithKline PLC ADR on August 25, 2024 and sell it today you would lose (963.00) from holding GlaxoSmithKline PLC ADR or give up 22.22% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 97.62% |
| Values | Daily Returns |
GlaxoSmithKline PLC ADR vs. ABCO Electronics Co
Performance |
| Timeline |
| GlaxoSmithKline PLC ADR |
| ABCO Electronics |
GlaxoSmithKline PLC and ABCO Electronics Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with GlaxoSmithKline PLC and ABCO Electronics
The main advantage of trading using opposite GlaxoSmithKline PLC and ABCO Electronics positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GlaxoSmithKline PLC position performs unexpectedly, ABCO Electronics 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 ABCO Electronics will offset losses from the drop in ABCO Electronics' 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 |
| ABCO Electronics vs. Korea Real Estate | ABCO Electronics vs. Korea Ratings Co | ABCO Electronics vs. IQuest Co | ABCO Electronics vs. Wonbang Tech Co |
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 Cryptocurrency Center module to build and monitor diversified portfolio of extremely risky digital assets and cryptocurrency.
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