Correlation Between GlaxoSmithKline PLC and Datang Telecom

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

Diversification Opportunities for GlaxoSmithKline PLC and Datang Telecom

-0.83
  Correlation Coefficient

Pay attention - limited upside

The 3 months correlation between GlaxoSmithKline and Datang is -0.83. Overlapping area represents the amount of risk that can be diversified away by holding GlaxoSmithKline PLC ADR and Datang Telecom Technology in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Datang Telecom 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 Datang Telecom. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Datang Telecom Technology has no effect on the direction of GlaxoSmithKline PLC i.e., GlaxoSmithKline PLC and Datang Telecom go up and down completely randomly.

Pair Corralation between GlaxoSmithKline PLC and Datang Telecom

Considering the 90-day investment horizon GlaxoSmithKline PLC is expected to generate 17.02 times less return on investment than Datang Telecom. But when comparing it to its historical volatility, GlaxoSmithKline PLC ADR is 2.52 times less risky than Datang Telecom. It trades about 0.01 of its potential returns per unit of risk. Datang Telecom Technology is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  635.00  in Datang Telecom Technology on August 29, 2024 and sell it today you would earn a total of  396.00  from holding Datang Telecom Technology or generate 62.36% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthSignificant
Accuracy96.17%
ValuesDaily Returns

GlaxoSmithKline PLC ADR  vs.  Datang Telecom Technology

 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.
Datang Telecom Technology 

Risk-Adjusted Performance

17 of 100

 
Weak
 
Strong
Solid
Compared to the overall equity markets, risk-adjusted returns on investments in Datang Telecom Technology are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Datang Telecom sustained solid returns over the last few months and may actually be approaching a breakup point.

GlaxoSmithKline PLC and Datang Telecom Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with GlaxoSmithKline PLC and Datang Telecom

The main advantage of trading using opposite GlaxoSmithKline PLC and Datang Telecom positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GlaxoSmithKline PLC position performs unexpectedly, Datang Telecom 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 Datang Telecom will offset losses from the drop in Datang Telecom's long position.
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The idea behind GlaxoSmithKline PLC ADR and Datang Telecom 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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.

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