Correlation Between GlaxoSmithKline PLC and Direxion Shares
Can any of the company-specific risk be diversified away by investing in both GlaxoSmithKline PLC and Direxion Shares 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 Direxion Shares 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 Direxion Shares ETF, you can compare the effects of market volatilities on GlaxoSmithKline PLC and Direxion Shares 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 Direxion Shares. Check out your portfolio center. Please also check ongoing floating volatility patterns of GlaxoSmithKline PLC and Direxion Shares.
Diversification Opportunities for GlaxoSmithKline PLC and Direxion Shares
-0.2 | Correlation Coefficient |
Good diversification
The 3 months correlation between GlaxoSmithKline and Direxion is -0.2. Overlapping area represents the amount of risk that can be diversified away by holding GlaxoSmithKline PLC ADR and Direxion Shares ETF in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Direxion Shares ETF 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 Direxion Shares. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Direxion Shares ETF has no effect on the direction of GlaxoSmithKline PLC i.e., GlaxoSmithKline PLC and Direxion Shares go up and down completely randomly.
Pair Corralation between GlaxoSmithKline PLC and Direxion Shares
Considering the 90-day investment horizon GlaxoSmithKline PLC ADR is expected to under-perform the Direxion Shares. But the stock apears to be less risky and, when comparing its historical volatility, GlaxoSmithKline PLC ADR is 1.66 times less risky than Direxion Shares. The stock trades about -0.23 of its potential returns per unit of risk. The Direxion Shares ETF is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest 3,511 in Direxion Shares ETF on August 31, 2024 and sell it today you would earn a total of 286.00 from holding Direxion Shares ETF or generate 8.15% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
GlaxoSmithKline PLC ADR vs. Direxion Shares ETF
Performance |
| Timeline |
| GlaxoSmithKline PLC ADR |
| Direxion Shares ETF |
GlaxoSmithKline PLC and Direxion Shares Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with GlaxoSmithKline PLC and Direxion Shares
The main advantage of trading using opposite GlaxoSmithKline PLC and Direxion Shares positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GlaxoSmithKline PLC position performs unexpectedly, Direxion Shares 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 Direxion Shares will offset losses from the drop in Direxion Shares' 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 |
| Direxion Shares vs. Direxion Daily AMZN | Direxion Shares vs. Direxion Daily MSFT | Direxion Shares vs. Direxion Daily GOOGL | Direxion Shares vs. Direxion Shares ETF |
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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.
Other Complementary Tools
| Idea Optimizer Use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio | |
| Alpha Finder Use alpha and beta coefficients to find investment opportunities after accounting for the risk | |
| Earnings Calls Check upcoming earnings announcements updated hourly across public exchanges | |
| Portfolio Suggestion Get suggestions outside of your existing asset allocation including your own model portfolios | |
| Performance Analysis Check effects of mean-variance optimization against your current asset allocation |