Correlation Between GlaxoSmithKline PLC and Bank Central
Can any of the company-specific risk be diversified away by investing in both GlaxoSmithKline PLC and Bank Central 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 Bank Central 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 Bank Central Asia, you can compare the effects of market volatilities on GlaxoSmithKline PLC and Bank Central 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 Bank Central. Check out your portfolio center. Please also check ongoing floating volatility patterns of GlaxoSmithKline PLC and Bank Central.
Diversification Opportunities for GlaxoSmithKline PLC and Bank Central
0.34 | Correlation Coefficient |
Weak diversification
The 3 months correlation between GlaxoSmithKline and Bank is 0.34. Overlapping area represents the amount of risk that can be diversified away by holding GlaxoSmithKline PLC ADR and Bank Central Asia in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bank Central Asia 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 Bank Central. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Bank Central Asia has no effect on the direction of GlaxoSmithKline PLC i.e., GlaxoSmithKline PLC and Bank Central go up and down completely randomly.
Pair Corralation between GlaxoSmithKline PLC and Bank Central
Considering the 90-day investment horizon GlaxoSmithKline PLC ADR is expected to under-perform the Bank Central. But the stock apears to be less risky and, when comparing its historical volatility, GlaxoSmithKline PLC ADR is 1.1 times less risky than Bank Central. The stock trades about -0.23 of its potential returns per unit of risk. The Bank Central Asia is currently generating about -0.1 of returns per unit of risk over similar time horizon. If you would invest 1,029,864 in Bank Central Asia on August 31, 2024 and sell it today you would lose (29,864) from holding Bank Central Asia or give up 2.9% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 95.45% |
| Values | Daily Returns |
GlaxoSmithKline PLC ADR vs. Bank Central Asia
Performance |
| Timeline |
| GlaxoSmithKline PLC ADR |
| Bank Central Asia |
GlaxoSmithKline PLC and Bank Central Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with GlaxoSmithKline PLC and Bank Central
The main advantage of trading using opposite GlaxoSmithKline PLC and Bank Central positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GlaxoSmithKline PLC position performs unexpectedly, Bank Central 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 Bank Central will offset losses from the drop in Bank Central'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 |
| Bank Central vs. Bank Rakyat Indonesia | Bank Central vs. Bank Mandiri Persero | Bank Central vs. Bank Negara Indonesia | Bank Central vs. Astra International Tbk |
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 File Import module to quickly import all of your third-party portfolios from your local drive in csv format.
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