Correlation Between GlaxoSmithKline PLC and Wistron Information

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

Diversification Opportunities for GlaxoSmithKline PLC and Wistron Information

-0.16
  Correlation Coefficient

Good diversification

The 3 months correlation between GlaxoSmithKline and Wistron is -0.16. Overlapping area represents the amount of risk that can be diversified away by holding GlaxoSmithKline PLC ADR and Wistron Information Technology in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Wistron Information 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 Wistron Information. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Wistron Information has no effect on the direction of GlaxoSmithKline PLC i.e., GlaxoSmithKline PLC and Wistron Information go up and down completely randomly.

Pair Corralation between GlaxoSmithKline PLC and Wistron Information

Considering the 90-day investment horizon GlaxoSmithKline PLC is expected to generate 1.74 times less return on investment than Wistron Information. But when comparing it to its historical volatility, GlaxoSmithKline PLC ADR is 1.7 times less risky than Wistron Information. It trades about 0.01 of its potential returns per unit of risk. Wistron Information Technology is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest  11,140  in Wistron Information Technology on August 31, 2024 and sell it today you would lose (240.00) from holding Wistron Information Technology or give up 2.15% of portfolio value over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthInsignificant
Accuracy98.48%
ValuesDaily Returns

GlaxoSmithKline PLC ADR  vs.  Wistron Information Technology

 Performance 
       Timeline  
GlaxoSmithKline PLC ADR 

Risk-Adjusted Performance

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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.
Wistron Information 

Risk-Adjusted Performance

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Weak
 
Strong
Very Weak
Over the last 90 days Wistron Information Technology has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable basic indicators, Wistron Information is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

GlaxoSmithKline PLC and Wistron Information Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with GlaxoSmithKline PLC and Wistron Information

The main advantage of trading using opposite GlaxoSmithKline PLC and Wistron Information positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GlaxoSmithKline PLC position performs unexpectedly, Wistron Information 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 Wistron Information will offset losses from the drop in Wistron Information's long position.
The idea behind GlaxoSmithKline PLC ADR and Wistron Information Technology 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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.

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