Correlation Between GlaxoSmithKline PLC and Prosus NV
Can any of the company-specific risk be diversified away by investing in both GlaxoSmithKline PLC and Prosus NV 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 Prosus NV 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 Prosus NV, you can compare the effects of market volatilities on GlaxoSmithKline PLC and Prosus NV 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 Prosus NV. Check out your portfolio center. Please also check ongoing floating volatility patterns of GlaxoSmithKline PLC and Prosus NV.
Diversification Opportunities for GlaxoSmithKline PLC and Prosus NV
-0.74 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between GlaxoSmithKline and Prosus is -0.74. Overlapping area represents the amount of risk that can be diversified away by holding GlaxoSmithKline PLC ADR and Prosus NV in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Prosus NV 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 Prosus NV. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Prosus NV has no effect on the direction of GlaxoSmithKline PLC i.e., GlaxoSmithKline PLC and Prosus NV go up and down completely randomly.
Pair Corralation between GlaxoSmithKline PLC and Prosus NV
Considering the 90-day investment horizon GlaxoSmithKline PLC is expected to generate 66.4 times less return on investment than Prosus NV. But when comparing it to its historical volatility, GlaxoSmithKline PLC ADR is 1.36 times less risky than Prosus NV. It trades about 0.0 of its potential returns per unit of risk. Prosus NV is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest 3,065 in Prosus NV on August 26, 2024 and sell it today you would earn a total of 708.00 from holding Prosus NV or generate 23.1% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 98.81% |
| Values | Daily Returns |
GlaxoSmithKline PLC ADR vs. Prosus NV
Performance |
| Timeline |
| GlaxoSmithKline PLC ADR |
| Prosus NV |
GlaxoSmithKline PLC and Prosus NV Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with GlaxoSmithKline PLC and Prosus NV
The main advantage of trading using opposite GlaxoSmithKline PLC and Prosus NV positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GlaxoSmithKline PLC position performs unexpectedly, Prosus NV 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 Prosus NV will offset losses from the drop in Prosus NV'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 |
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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.
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