Correlation Between GlaxoSmithKline PLC and Homecast CoLtd
Can any of the company-specific risk be diversified away by investing in both GlaxoSmithKline PLC and Homecast CoLtd 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 Homecast CoLtd 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 Homecast CoLtd, you can compare the effects of market volatilities on GlaxoSmithKline PLC and Homecast CoLtd 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 Homecast CoLtd. Check out your portfolio center. Please also check ongoing floating volatility patterns of GlaxoSmithKline PLC and Homecast CoLtd.
Diversification Opportunities for GlaxoSmithKline PLC and Homecast CoLtd
0.72 | Correlation Coefficient |
Poor diversification
The 3 months correlation between GlaxoSmithKline and Homecast is 0.72. Overlapping area represents the amount of risk that can be diversified away by holding GlaxoSmithKline PLC ADR and Homecast CoLtd in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Homecast CoLtd 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 Homecast CoLtd. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Homecast CoLtd has no effect on the direction of GlaxoSmithKline PLC i.e., GlaxoSmithKline PLC and Homecast CoLtd go up and down completely randomly.
Pair Corralation between GlaxoSmithKline PLC and Homecast CoLtd
Considering the 90-day investment horizon GlaxoSmithKline PLC ADR is expected to under-perform the Homecast CoLtd. But the stock apears to be less risky and, when comparing its historical volatility, GlaxoSmithKline PLC ADR is 2.3 times less risky than Homecast CoLtd. The stock trades about -0.3 of its potential returns per unit of risk. The Homecast CoLtd is currently generating about -0.04 of returns per unit of risk over similar time horizon. If you would invest 271,500 in Homecast CoLtd on August 28, 2024 and sell it today you would lose (9,500) from holding Homecast CoLtd or give up 3.5% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
GlaxoSmithKline PLC ADR vs. Homecast CoLtd
Performance |
| Timeline |
| GlaxoSmithKline PLC ADR |
| Homecast CoLtd |
GlaxoSmithKline PLC and Homecast CoLtd Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with GlaxoSmithKline PLC and Homecast CoLtd
The main advantage of trading using opposite GlaxoSmithKline PLC and Homecast CoLtd positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GlaxoSmithKline PLC position performs unexpectedly, Homecast CoLtd 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 Homecast CoLtd will offset losses from the drop in Homecast CoLtd'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 |
| Homecast CoLtd vs. Ssangyong Materials Corp | Homecast CoLtd vs. MetaLabs Co | Homecast CoLtd vs. Iljin Materials Co | Homecast CoLtd vs. Kbi Metal 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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.
Other Complementary Tools
| Piotroski F Score Get Piotroski F Score based on the binary analysis strategy of nine different fundamentals | |
| Price Ceiling Movement Calculate and plot Price Ceiling Movement for different equity instruments | |
| Pair Correlation Compare performance and examine fundamental relationship between any two equity instruments | |
| Fundamental Analysis View fundamental data based on most recent published financial statements | |
| Portfolio Holdings Check your current holdings and cash postion to detemine if your portfolio needs rebalancing |