Correlation Between GlaxoSmithKline PLC and Europlasma
Can any of the company-specific risk be diversified away by investing in both GlaxoSmithKline PLC and Europlasma 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 Europlasma 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 Europlasma SA, you can compare the effects of market volatilities on GlaxoSmithKline PLC and Europlasma 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 Europlasma. Check out your portfolio center. Please also check ongoing floating volatility patterns of GlaxoSmithKline PLC and Europlasma.
Diversification Opportunities for GlaxoSmithKline PLC and Europlasma
-0.3 | Correlation Coefficient |
Very good diversification
The 3 months correlation between GlaxoSmithKline and Europlasma is -0.3. Overlapping area represents the amount of risk that can be diversified away by holding GlaxoSmithKline PLC ADR and Europlasma SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Europlasma SA 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 Europlasma. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Europlasma SA has no effect on the direction of GlaxoSmithKline PLC i.e., GlaxoSmithKline PLC and Europlasma go up and down completely randomly.
Pair Corralation between GlaxoSmithKline PLC and Europlasma
Considering the 90-day investment horizon GlaxoSmithKline PLC ADR is expected to generate 0.06 times more return on investment than Europlasma. However, GlaxoSmithKline PLC ADR is 17.35 times less risky than Europlasma. It trades about 0.03 of its potential returns per unit of risk. Europlasma SA is currently generating about -0.05 per unit of risk. If you would invest 3,199 in GlaxoSmithKline PLC ADR on November 19, 2024 and sell it today you would earn a total of 418.00 from holding GlaxoSmithKline PLC ADR or generate 13.07% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 98.61% |
| Values | Daily Returns |
GlaxoSmithKline PLC ADR vs. Europlasma SA
Performance |
| Timeline |
| GlaxoSmithKline PLC ADR |
| Europlasma SA |
GlaxoSmithKline PLC and Europlasma Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with GlaxoSmithKline PLC and Europlasma
The main advantage of trading using opposite GlaxoSmithKline PLC and Europlasma positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GlaxoSmithKline PLC position performs unexpectedly, Europlasma 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 Europlasma will offset losses from the drop in Europlasma'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 |
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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.
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