Correlation Between GlaxoSmithKline PLC and LG Energy
Can any of the company-specific risk be diversified away by investing in both GlaxoSmithKline PLC and LG Energy 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 LG Energy 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 LG Energy Solution, you can compare the effects of market volatilities on GlaxoSmithKline PLC and LG Energy 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 LG Energy. Check out your portfolio center. Please also check ongoing floating volatility patterns of GlaxoSmithKline PLC and LG Energy.
Diversification Opportunities for GlaxoSmithKline PLC and LG Energy
-0.26 | Correlation Coefficient |
Very good diversification
The 3 months correlation between GlaxoSmithKline and 373220 is -0.26. Overlapping area represents the amount of risk that can be diversified away by holding GlaxoSmithKline PLC ADR and LG Energy Solution in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on LG Energy Solution 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 LG Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of LG Energy Solution has no effect on the direction of GlaxoSmithKline PLC i.e., GlaxoSmithKline PLC and LG Energy go up and down completely randomly.
Pair Corralation between GlaxoSmithKline PLC and LG Energy
Considering the 90-day investment horizon GlaxoSmithKline PLC ADR is expected to under-perform the LG Energy. But the stock apears to be less risky and, when comparing its historical volatility, GlaxoSmithKline PLC ADR is 3.15 times less risky than LG Energy. The stock trades about -0.23 of its potential returns per unit of risk. The LG Energy Solution is currently generating about -0.05 of returns per unit of risk over similar time horizon. If you would invest 40,750,000 in LG Energy Solution on September 1, 2024 and sell it today you would lose (2,600,000) from holding LG Energy Solution or give up 6.38% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 95.45% |
| Values | Daily Returns |
GlaxoSmithKline PLC ADR vs. LG Energy Solution
Performance |
| Timeline |
| GlaxoSmithKline PLC ADR |
| LG Energy Solution |
GlaxoSmithKline PLC and LG Energy Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with GlaxoSmithKline PLC and LG Energy
The main advantage of trading using opposite GlaxoSmithKline PLC and LG Energy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GlaxoSmithKline PLC position performs unexpectedly, LG Energy 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 LG Energy will offset losses from the drop in LG Energy'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 |
| LG Energy vs. Doosan Heavy Ind | LG Energy vs. Hyosung Heavy Industries | LG Energy vs. Aprogen KIC | LG Energy vs. SNTEnergy 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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.
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