Correlation Between GlaxoSmithKline PLC and American Funds
Can any of the company-specific risk be diversified away by investing in both GlaxoSmithKline PLC and American Funds 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 American Funds 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 American Funds 2035, you can compare the effects of market volatilities on GlaxoSmithKline PLC and American Funds 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 American Funds. Check out your portfolio center. Please also check ongoing floating volatility patterns of GlaxoSmithKline PLC and American Funds.
Diversification Opportunities for GlaxoSmithKline PLC and American Funds
-0.59 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between GlaxoSmithKline and American is -0.59. Overlapping area represents the amount of risk that can be diversified away by holding GlaxoSmithKline PLC ADR and American Funds 2035 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on American Funds 2035 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 American Funds. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of American Funds 2035 has no effect on the direction of GlaxoSmithKline PLC i.e., GlaxoSmithKline PLC and American Funds go up and down completely randomly.
Pair Corralation between GlaxoSmithKline PLC and American Funds
Considering the 90-day investment horizon GlaxoSmithKline PLC is expected to generate 2.45 times less return on investment than American Funds. In addition to that, GlaxoSmithKline PLC is 2.3 times more volatile than American Funds 2035. It trades about 0.02 of its total potential returns per unit of risk. American Funds 2035 is currently generating about 0.1 per unit of volatility. If you would invest 1,538 in American Funds 2035 on August 31, 2024 and sell it today you would earn a total of 468.00 from holding American Funds 2035 or generate 30.43% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
GlaxoSmithKline PLC ADR vs. American Funds 2035
Performance |
| Timeline |
| GlaxoSmithKline PLC ADR |
| American Funds 2035 |
GlaxoSmithKline PLC and American Funds Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with GlaxoSmithKline PLC and American Funds
The main advantage of trading using opposite GlaxoSmithKline PLC and American Funds positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GlaxoSmithKline PLC position performs unexpectedly, American Funds 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 American Funds will offset losses from the drop in American Funds' 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 |
| American Funds vs. Dreyfusstandish Global Fixed | American Funds vs. T Rowe Price | American Funds vs. Commonwealth Global Fund | American Funds vs. Mirova Global Green |
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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