Correlation Between GlaxoSmithKline PLC and Shanghai Commercial
Can any of the company-specific risk be diversified away by investing in both GlaxoSmithKline PLC and Shanghai Commercial 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 Shanghai Commercial 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 Shanghai Commercial Savings, you can compare the effects of market volatilities on GlaxoSmithKline PLC and Shanghai Commercial 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 Shanghai Commercial. Check out your portfolio center. Please also check ongoing floating volatility patterns of GlaxoSmithKline PLC and Shanghai Commercial.
Diversification Opportunities for GlaxoSmithKline PLC and Shanghai Commercial
0.07 | Correlation Coefficient |
Significant diversification
The 3 months correlation between GlaxoSmithKline and Shanghai is 0.07. Overlapping area represents the amount of risk that can be diversified away by holding GlaxoSmithKline PLC ADR and Shanghai Commercial Savings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Shanghai Commercial 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 Shanghai Commercial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Shanghai Commercial has no effect on the direction of GlaxoSmithKline PLC i.e., GlaxoSmithKline PLC and Shanghai Commercial go up and down completely randomly.
Pair Corralation between GlaxoSmithKline PLC and Shanghai Commercial
Considering the 90-day investment horizon GlaxoSmithKline PLC ADR is expected to under-perform the Shanghai Commercial. But the stock apears to be less risky and, when comparing its historical volatility, GlaxoSmithKline PLC ADR is 1.0 times less risky than Shanghai Commercial. The stock trades about -0.24 of its potential returns per unit of risk. The Shanghai Commercial Savings is currently generating about -0.07 of returns per unit of risk over similar time horizon. If you would invest 4,005 in Shanghai Commercial Savings on August 31, 2024 and sell it today you would lose (80.00) from holding Shanghai Commercial Savings or give up 2.0% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
GlaxoSmithKline PLC ADR vs. Shanghai Commercial Savings
Performance |
| Timeline |
| GlaxoSmithKline PLC ADR |
| Shanghai Commercial |
GlaxoSmithKline PLC and Shanghai Commercial Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with GlaxoSmithKline PLC and Shanghai Commercial
The main advantage of trading using opposite GlaxoSmithKline PLC and Shanghai Commercial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GlaxoSmithKline PLC position performs unexpectedly, Shanghai Commercial 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 Shanghai Commercial will offset losses from the drop in Shanghai Commercial'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 |
| Shanghai Commercial vs. Central Reinsurance Corp | Shanghai Commercial vs. Huaku Development Co | Shanghai Commercial vs. Fubon Financial Holding | Shanghai Commercial vs. CTBC Financial Holding |
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 Stock Tickers module to use high-impact, comprehensive, and customizable stock tickers that can be easily integrated to any websites.
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