Correlation Between GlaxoSmithKline PLC and Amazon
Can any of the company-specific risk be diversified away by investing in both GlaxoSmithKline PLC and Amazon 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 Amazon 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 Amazon Inc, you can compare the effects of market volatilities on GlaxoSmithKline PLC and Amazon 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 Amazon. Check out your portfolio center. Please also check ongoing floating volatility patterns of GlaxoSmithKline PLC and Amazon.
Diversification Opportunities for GlaxoSmithKline PLC and Amazon
-0.7 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between GlaxoSmithKline and Amazon is -0.7. Overlapping area represents the amount of risk that can be diversified away by holding GlaxoSmithKline PLC ADR and Amazon Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Amazon Inc 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 Amazon. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Amazon Inc has no effect on the direction of GlaxoSmithKline PLC i.e., GlaxoSmithKline PLC and Amazon go up and down completely randomly.
Pair Corralation between GlaxoSmithKline PLC and Amazon
Considering the 90-day investment horizon GlaxoSmithKline PLC ADR is expected to under-perform the Amazon. But the stock apears to be less risky and, when comparing its historical volatility, GlaxoSmithKline PLC ADR is 1.37 times less risky than Amazon. The stock trades about -0.23 of its potential returns per unit of risk. The Amazon Inc is currently generating about 0.17 of returns per unit of risk over similar time horizon. If you would invest 349,900 in Amazon Inc on August 31, 2024 and sell it today you would earn a total of 73,329 from holding Amazon Inc or generate 20.96% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 96.83% |
| Values | Daily Returns |
GlaxoSmithKline PLC ADR vs. Amazon Inc
Performance |
| Timeline |
| GlaxoSmithKline PLC ADR |
| Amazon Inc |
GlaxoSmithKline PLC and Amazon Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with GlaxoSmithKline PLC and Amazon
The main advantage of trading using opposite GlaxoSmithKline PLC and Amazon positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GlaxoSmithKline PLC position performs unexpectedly, Amazon 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 Amazon will offset losses from the drop in Amazon'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 |
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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 Technical Analysis module to check basic technical indicators and analysis based on most latest market data.
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