Correlation Between GlaxoSmithKline PLC and Dirui Industrial

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

Diversification Opportunities for GlaxoSmithKline PLC and Dirui Industrial

-0.54
  Correlation Coefficient

Excellent diversification

The 3 months correlation between GlaxoSmithKline and Dirui is -0.54. Overlapping area represents the amount of risk that can be diversified away by holding GlaxoSmithKline PLC ADR and Dirui Industrial Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dirui Industrial 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 Dirui Industrial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dirui Industrial has no effect on the direction of GlaxoSmithKline PLC i.e., GlaxoSmithKline PLC and Dirui Industrial go up and down completely randomly.

Pair Corralation between GlaxoSmithKline PLC and Dirui Industrial

Considering the 90-day investment horizon GlaxoSmithKline PLC ADR is expected to generate 0.41 times more return on investment than Dirui Industrial. However, GlaxoSmithKline PLC ADR is 2.45 times less risky than Dirui Industrial. It trades about 0.01 of its potential returns per unit of risk. Dirui Industrial Co is currently generating about -0.02 per unit of risk. If you would invest  3,326  in GlaxoSmithKline PLC ADR on August 30, 2024 and sell it today you would earn a total of  107.00  from holding GlaxoSmithKline PLC ADR or generate 3.22% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthVery Weak
Accuracy96.16%
ValuesDaily Returns

GlaxoSmithKline PLC ADR  vs.  Dirui Industrial Co

 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.
Dirui Industrial 

Risk-Adjusted Performance

5 of 100

 
Weak
 
Strong
Modest
Compared to the overall equity markets, risk-adjusted returns on investments in Dirui Industrial Co are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Dirui Industrial sustained solid returns over the last few months and may actually be approaching a breakup point.

GlaxoSmithKline PLC and Dirui Industrial Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with GlaxoSmithKline PLC and Dirui Industrial

The main advantage of trading using opposite GlaxoSmithKline PLC and Dirui Industrial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GlaxoSmithKline PLC position performs unexpectedly, Dirui Industrial 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 Dirui Industrial will offset losses from the drop in Dirui Industrial's long position.
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The idea behind GlaxoSmithKline PLC ADR and Dirui Industrial Co 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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.

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