Correlation Between GlaxoSmithKline PLC and AstraZeneca PLC
Can any of the company-specific risk be diversified away by investing in both GlaxoSmithKline PLC and AstraZeneca PLC 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 AstraZeneca PLC 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 AstraZeneca PLC ADR, you can compare the effects of market volatilities on GlaxoSmithKline PLC and AstraZeneca PLC 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 AstraZeneca PLC. Check out your portfolio center. Please also check ongoing floating volatility patterns of GlaxoSmithKline PLC and AstraZeneca PLC.
Diversification Opportunities for GlaxoSmithKline PLC and AstraZeneca PLC
0.87 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between GlaxoSmithKline and AstraZeneca is 0.87. Overlapping area represents the amount of risk that can be diversified away by holding GlaxoSmithKline PLC ADR and AstraZeneca PLC ADR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AstraZeneca PLC ADR 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 AstraZeneca PLC. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of AstraZeneca PLC ADR has no effect on the direction of GlaxoSmithKline PLC i.e., GlaxoSmithKline PLC and AstraZeneca PLC go up and down completely randomly.
Pair Corralation between GlaxoSmithKline PLC and AstraZeneca PLC
Considering the 90-day investment horizon GlaxoSmithKline PLC ADR is expected to generate 0.67 times more return on investment than AstraZeneca PLC. However, GlaxoSmithKline PLC ADR is 1.49 times less risky than AstraZeneca PLC. It trades about -0.35 of its potential returns per unit of risk. AstraZeneca PLC ADR is currently generating about -0.39 per unit of risk. If you would invest 3,757 in GlaxoSmithKline PLC ADR on August 23, 2024 and sell it today you would lose (387.00) from holding GlaxoSmithKline PLC ADR or give up 10.3% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
GlaxoSmithKline PLC ADR vs. AstraZeneca PLC ADR
Performance |
| Timeline |
| GlaxoSmithKline PLC ADR |
| AstraZeneca PLC ADR |
GlaxoSmithKline PLC and AstraZeneca PLC Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with GlaxoSmithKline PLC and AstraZeneca PLC
The main advantage of trading using opposite GlaxoSmithKline PLC and AstraZeneca PLC positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GlaxoSmithKline PLC position performs unexpectedly, AstraZeneca PLC 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 AstraZeneca PLC will offset losses from the drop in AstraZeneca PLC'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 Commodity Directory module to find actively traded commodities issued by global exchanges.
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