Correlation Between GlaxoSmithKline PLC and AMERICAN EXPRESS
Can any of the company-specific risk be diversified away by investing in both GlaxoSmithKline PLC and AMERICAN EXPRESS 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 EXPRESS 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 EXPRESS CDR, you can compare the effects of market volatilities on GlaxoSmithKline PLC and AMERICAN EXPRESS 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 EXPRESS. Check out your portfolio center. Please also check ongoing floating volatility patterns of GlaxoSmithKline PLC and AMERICAN EXPRESS.
Diversification Opportunities for GlaxoSmithKline PLC and AMERICAN EXPRESS
0.43 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between GlaxoSmithKline and AMERICAN is 0.43. Overlapping area represents the amount of risk that can be diversified away by holding GlaxoSmithKline PLC ADR and AMERICAN EXPRESS CDR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AMERICAN EXPRESS CDR 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 EXPRESS. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of AMERICAN EXPRESS CDR has no effect on the direction of GlaxoSmithKline PLC i.e., GlaxoSmithKline PLC and AMERICAN EXPRESS go up and down completely randomly.
Pair Corralation between GlaxoSmithKline PLC and AMERICAN EXPRESS
Considering the 90-day investment horizon GlaxoSmithKline PLC ADR is expected to under-perform the AMERICAN EXPRESS. But the stock apears to be less risky and, when comparing its historical volatility, GlaxoSmithKline PLC ADR is 1.39 times less risky than AMERICAN EXPRESS. The stock trades about 0.0 of its potential returns per unit of risk. The AMERICAN EXPRESS CDR is currently generating about 0.14 of returns per unit of risk over similar time horizon. If you would invest 2,377 in AMERICAN EXPRESS CDR on August 27, 2024 and sell it today you would earn a total of 279.00 from holding AMERICAN EXPRESS CDR or generate 11.74% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 18.55% |
| Values | Daily Returns |
GlaxoSmithKline PLC ADR vs. AMERICAN EXPRESS CDR
Performance |
| Timeline |
| GlaxoSmithKline PLC ADR |
| AMERICAN EXPRESS CDR |
GlaxoSmithKline PLC and AMERICAN EXPRESS Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with GlaxoSmithKline PLC and AMERICAN EXPRESS
The main advantage of trading using opposite GlaxoSmithKline PLC and AMERICAN EXPRESS positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GlaxoSmithKline PLC position performs unexpectedly, AMERICAN EXPRESS 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 EXPRESS will offset losses from the drop in AMERICAN EXPRESS'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 |
| AMERICAN EXPRESS vs. Canlan Ice Sports | AMERICAN EXPRESS vs. East Side Games | AMERICAN EXPRESS vs. Enthusiast Gaming Holdings | AMERICAN EXPRESS vs. Brookfield Office Properties |
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 Sync Your Broker module to sync your existing holdings, watchlists, positions or portfolios from thousands of online brokerage services, banks, investment account aggregators and robo-advisors..
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