Correlation Between GlaxoSmithKline PLC and Harmony Electronics
Can any of the company-specific risk be diversified away by investing in both GlaxoSmithKline PLC and Harmony Electronics 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 Harmony Electronics 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 Harmony Electronics, you can compare the effects of market volatilities on GlaxoSmithKline PLC and Harmony Electronics 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 Harmony Electronics. Check out your portfolio center. Please also check ongoing floating volatility patterns of GlaxoSmithKline PLC and Harmony Electronics.
Diversification Opportunities for GlaxoSmithKline PLC and Harmony Electronics
0.5 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between GlaxoSmithKline and Harmony is 0.5. Overlapping area represents the amount of risk that can be diversified away by holding GlaxoSmithKline PLC ADR and Harmony Electronics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Harmony Electronics 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 Harmony Electronics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Harmony Electronics has no effect on the direction of GlaxoSmithKline PLC i.e., GlaxoSmithKline PLC and Harmony Electronics go up and down completely randomly.
Pair Corralation between GlaxoSmithKline PLC and Harmony Electronics
Considering the 90-day investment horizon GlaxoSmithKline PLC ADR is expected to under-perform the Harmony Electronics. But the stock apears to be less risky and, when comparing its historical volatility, GlaxoSmithKline PLC ADR is 1.22 times less risky than Harmony Electronics. The stock trades about -0.08 of its potential returns per unit of risk. The Harmony Electronics is currently generating about -0.02 of returns per unit of risk over similar time horizon. If you would invest 3,620 in Harmony Electronics on August 31, 2024 and sell it today you would lose (240.00) from holding Harmony Electronics or give up 6.63% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
GlaxoSmithKline PLC ADR vs. Harmony Electronics
Performance |
| Timeline |
| GlaxoSmithKline PLC ADR |
| Harmony Electronics |
GlaxoSmithKline PLC and Harmony Electronics Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with GlaxoSmithKline PLC and Harmony Electronics
The main advantage of trading using opposite GlaxoSmithKline PLC and Harmony Electronics positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GlaxoSmithKline PLC position performs unexpectedly, Harmony Electronics 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 Harmony Electronics will offset losses from the drop in Harmony Electronics' 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 |
| Harmony Electronics vs. Chipbond Technology | Harmony Electronics vs. Allied Circuit Co | Harmony Electronics vs. Weltrend Semiconductor | Harmony Electronics vs. Leatec Fine Ceramics |
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 Portfolio Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.
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