Correlation Between GlaxoSmithKline PLC and China Molybdenum

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

Diversification Opportunities for GlaxoSmithKline PLC and China Molybdenum

-0.43
  Correlation Coefficient

Very good diversification

The 3 months correlation between GlaxoSmithKline and China is -0.43. Overlapping area represents the amount of risk that can be diversified away by holding GlaxoSmithKline PLC ADR and China Molybdenum Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on China Molybdenum 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 China Molybdenum. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of China Molybdenum has no effect on the direction of GlaxoSmithKline PLC i.e., GlaxoSmithKline PLC and China Molybdenum go up and down completely randomly.

Pair Corralation between GlaxoSmithKline PLC and China Molybdenum

Considering the 90-day investment horizon GlaxoSmithKline PLC ADR is expected to under-perform the China Molybdenum. But the stock apears to be less risky and, when comparing its historical volatility, GlaxoSmithKline PLC ADR is 1.48 times less risky than China Molybdenum. The stock trades about -0.3 of its potential returns per unit of risk. The China Molybdenum Co is currently generating about -0.19 of returns per unit of risk over similar time horizon. If you would invest  792.00  in China Molybdenum Co on August 28, 2024 and sell it today you would lose (65.00) from holding China Molybdenum Co or give up 8.21% of portfolio value over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthVery Weak
Accuracy100.0%
ValuesDaily Returns

GlaxoSmithKline PLC ADR  vs.  China Molybdenum Co

 Performance 
       Timeline  
GlaxoSmithKline PLC ADR 

Risk-Adjusted Performance

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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.
China Molybdenum 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days China Molybdenum Co has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, China Molybdenum is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

GlaxoSmithKline PLC and China Molybdenum Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with GlaxoSmithKline PLC and China Molybdenum

The main advantage of trading using opposite GlaxoSmithKline PLC and China Molybdenum positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GlaxoSmithKline PLC position performs unexpectedly, China Molybdenum 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 China Molybdenum will offset losses from the drop in China Molybdenum's long position.
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The idea behind GlaxoSmithKline PLC ADR and China Molybdenum Co 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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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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.

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