Correlation Between GlaxoSmithKline PLC and Answer Technology
Can any of the company-specific risk be diversified away by investing in both GlaxoSmithKline PLC and Answer Technology 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 Answer Technology 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 Answer Technology Co, you can compare the effects of market volatilities on GlaxoSmithKline PLC and Answer Technology 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 Answer Technology. Check out your portfolio center. Please also check ongoing floating volatility patterns of GlaxoSmithKline PLC and Answer Technology.
Diversification Opportunities for GlaxoSmithKline PLC and Answer Technology
0.87 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between GlaxoSmithKline and Answer is 0.87. Overlapping area represents the amount of risk that can be diversified away by holding GlaxoSmithKline PLC ADR and Answer Technology Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Answer Technology 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 Answer Technology. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Answer Technology has no effect on the direction of GlaxoSmithKline PLC i.e., GlaxoSmithKline PLC and Answer Technology go up and down completely randomly.
Pair Corralation between GlaxoSmithKline PLC and Answer Technology
Considering the 90-day investment horizon GlaxoSmithKline PLC is expected to generate 1.08 times less return on investment than Answer Technology. But when comparing it to its historical volatility, GlaxoSmithKline PLC ADR is 1.22 times less risky than Answer Technology. It trades about 0.01 of its potential returns per unit of risk. Answer Technology Co is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest 5,000 in Answer Technology Co on August 30, 2024 and sell it today you would earn a total of 90.00 from holding Answer Technology Co or generate 1.8% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 96.77% |
| Values | Daily Returns |
GlaxoSmithKline PLC ADR vs. Answer Technology Co
Performance |
| Timeline |
| GlaxoSmithKline PLC ADR |
| Answer Technology |
GlaxoSmithKline PLC and Answer Technology Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with GlaxoSmithKline PLC and Answer Technology
The main advantage of trading using opposite GlaxoSmithKline PLC and Answer Technology positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GlaxoSmithKline PLC position performs unexpectedly, Answer Technology 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 Answer Technology will offset losses from the drop in Answer Technology'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 |
| Answer Technology vs. Xander International | Answer Technology vs. MetaTech AP | Answer Technology vs. Niching Industrial | Answer Technology vs. Sentronic International |
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 Stocks Directory module to find actively traded stocks across global markets.
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