Correlation Between GlaxoSmithKline PLC and AIB Group
Can any of the company-specific risk be diversified away by investing in both GlaxoSmithKline PLC and AIB Group 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 AIB Group 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 AIB Group plc, you can compare the effects of market volatilities on GlaxoSmithKline PLC and AIB Group 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 AIB Group. Check out your portfolio center. Please also check ongoing floating volatility patterns of GlaxoSmithKline PLC and AIB Group.
Diversification Opportunities for GlaxoSmithKline PLC and AIB Group
0.23 | Correlation Coefficient |
Modest diversification
The 3 months correlation between GlaxoSmithKline and AIB is 0.23. Overlapping area represents the amount of risk that can be diversified away by holding GlaxoSmithKline PLC ADR and AIB Group plc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AIB Group plc 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 AIB Group. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of AIB Group plc has no effect on the direction of GlaxoSmithKline PLC i.e., GlaxoSmithKline PLC and AIB Group go up and down completely randomly.
Pair Corralation between GlaxoSmithKline PLC and AIB Group
Considering the 90-day investment horizon GlaxoSmithKline PLC ADR is expected to under-perform the AIB Group. But the stock apears to be less risky and, when comparing its historical volatility, GlaxoSmithKline PLC ADR is 1.31 times less risky than AIB Group. The stock trades about -0.12 of its potential returns per unit of risk. The AIB Group plc is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest 510.00 in AIB Group plc on August 26, 2024 and sell it today you would earn a total of 27.00 from holding AIB Group plc or generate 5.29% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 97.69% |
| Values | Daily Returns |
GlaxoSmithKline PLC ADR vs. AIB Group plc
Performance |
| Timeline |
| GlaxoSmithKline PLC ADR |
| AIB Group plc |
GlaxoSmithKline PLC and AIB Group Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with GlaxoSmithKline PLC and AIB Group
The main advantage of trading using opposite GlaxoSmithKline PLC and AIB Group positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GlaxoSmithKline PLC position performs unexpectedly, AIB Group 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 AIB Group will offset losses from the drop in AIB Group'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 |
| AIB Group vs. Coeur Mining | AIB Group vs. CEOTRONICS | AIB Group vs. MINCO SILVER | AIB Group vs. GALENA MINING LTD |
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 Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.
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