Correlation Between GlaxoSmithKline PLC and Aena SME
Can any of the company-specific risk be diversified away by investing in both GlaxoSmithKline PLC and Aena SME 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 Aena SME 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 Aena SME SA, you can compare the effects of market volatilities on GlaxoSmithKline PLC and Aena SME 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 Aena SME. Check out your portfolio center. Please also check ongoing floating volatility patterns of GlaxoSmithKline PLC and Aena SME.
Diversification Opportunities for GlaxoSmithKline PLC and Aena SME
-0.34 | Correlation Coefficient |
Very good diversification
The 3 months correlation between GlaxoSmithKline and Aena is -0.34. Overlapping area represents the amount of risk that can be diversified away by holding GlaxoSmithKline PLC ADR and Aena SME SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Aena SME 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 Aena SME. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Aena SME SA has no effect on the direction of GlaxoSmithKline PLC i.e., GlaxoSmithKline PLC and Aena SME go up and down completely randomly.
Pair Corralation between GlaxoSmithKline PLC and Aena SME
Considering the 90-day investment horizon GlaxoSmithKline PLC ADR is expected to under-perform the Aena SME. In addition to that, GlaxoSmithKline PLC is 1.59 times more volatile than Aena SME SA. It trades about -0.31 of its total potential returns per unit of risk. Aena SME SA is currently generating about -0.26 per unit of volatility. If you would invest 22,321 in Aena SME SA on August 29, 2024 and sell it today you would lose (1,110) from holding Aena SME SA or give up 4.97% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
GlaxoSmithKline PLC ADR vs. Aena SME SA
Performance |
| Timeline |
| GlaxoSmithKline PLC ADR |
| Aena SME SA |
GlaxoSmithKline PLC and Aena SME Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with GlaxoSmithKline PLC and Aena SME
The main advantage of trading using opposite GlaxoSmithKline PLC and Aena SME positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GlaxoSmithKline PLC position performs unexpectedly, Aena SME 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 Aena SME will offset losses from the drop in Aena SME'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 Portfolio Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.
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