Correlation Between GlaxoSmithKline PLC and Groupama Entreprises

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Can any of the company-specific risk be diversified away by investing in both GlaxoSmithKline PLC and Groupama Entreprises 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 Groupama Entreprises 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 Groupama Entreprises N, you can compare the effects of market volatilities on GlaxoSmithKline PLC and Groupama Entreprises 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 Groupama Entreprises. Check out your portfolio center. Please also check ongoing floating volatility patterns of GlaxoSmithKline PLC and Groupama Entreprises.

Diversification Opportunities for GlaxoSmithKline PLC and Groupama Entreprises

-0.98
  Correlation Coefficient

Pay attention - limited upside

The 3 months correlation between GlaxoSmithKline and Groupama is -0.98. Overlapping area represents the amount of risk that can be diversified away by holding GlaxoSmithKline PLC ADR and Groupama Entreprises N in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Groupama Entreprises 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 Groupama Entreprises. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Groupama Entreprises has no effect on the direction of GlaxoSmithKline PLC i.e., GlaxoSmithKline PLC and Groupama Entreprises go up and down completely randomly.

Pair Corralation between GlaxoSmithKline PLC and Groupama Entreprises

Considering the 90-day investment horizon GlaxoSmithKline PLC is expected to generate 1.67 times less return on investment than Groupama Entreprises. In addition to that, GlaxoSmithKline PLC is 89.74 times more volatile than Groupama Entreprises N. It trades about 0.01 of its total potential returns per unit of risk. Groupama Entreprises N is currently generating about 0.98 per unit of volatility. If you would invest  55,988  in Groupama Entreprises N on August 30, 2024 and sell it today you would earn a total of  3,286  from holding Groupama Entreprises N or generate 5.87% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthSignificant
Accuracy98.01%
ValuesDaily Returns

GlaxoSmithKline PLC ADR  vs.  Groupama Entreprises N

 Performance 
       Timeline  
GlaxoSmithKline PLC ADR 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days GlaxoSmithKline PLC ADR has generated negative risk-adjusted returns adding no value to investors with long positions. Despite uncertain performance in the last few months, the Stock's basic indicators remain quite persistent which may send shares a bit higher in December 2024. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.
Groupama Entreprises 

Risk-Adjusted Performance

72 of 100

 
Weak
 
Strong
Market Crasher
Compared to the overall equity markets, risk-adjusted returns on investments in Groupama Entreprises N are ranked lower than 72 (%) of all funds and portfolios of funds over the last 90 days. Despite somewhat strong basic indicators, Groupama Entreprises is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

GlaxoSmithKline PLC and Groupama Entreprises Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with GlaxoSmithKline PLC and Groupama Entreprises

The main advantage of trading using opposite GlaxoSmithKline PLC and Groupama Entreprises positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GlaxoSmithKline PLC position performs unexpectedly, Groupama Entreprises 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 Groupama Entreprises will offset losses from the drop in Groupama Entreprises' long position.
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The idea behind GlaxoSmithKline PLC ADR and Groupama Entreprises N pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.
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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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.

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