Correlation Between GlaxoSmithKline PLC and Investment
Can any of the company-specific risk be diversified away by investing in both GlaxoSmithKline PLC and Investment 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 Investment 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 Investment and Industrial, you can compare the effects of market volatilities on GlaxoSmithKline PLC and Investment 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 Investment. Check out your portfolio center. Please also check ongoing floating volatility patterns of GlaxoSmithKline PLC and Investment.
Diversification Opportunities for GlaxoSmithKline PLC and Investment
0.8 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between GlaxoSmithKline and Investment is 0.8. Overlapping area represents the amount of risk that can be diversified away by holding GlaxoSmithKline PLC ADR and Investment and Industrial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Investment and Industrial 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 Investment. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Investment and Industrial has no effect on the direction of GlaxoSmithKline PLC i.e., GlaxoSmithKline PLC and Investment go up and down completely randomly.
Pair Corralation between GlaxoSmithKline PLC and Investment
Considering the 90-day investment horizon GlaxoSmithKline PLC ADR is expected to generate 0.79 times more return on investment than Investment. However, GlaxoSmithKline PLC ADR is 1.27 times less risky than Investment. It trades about 0.01 of its potential returns per unit of risk. Investment and Industrial is currently generating about -0.01 per unit of risk. If you would invest 3,385 in GlaxoSmithKline PLC ADR on August 29, 2024 and sell it today you would earn a total of 17.00 from holding GlaxoSmithKline PLC ADR or generate 0.5% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 99.19% |
| Values | Daily Returns |
GlaxoSmithKline PLC ADR vs. Investment and Industrial
Performance |
| Timeline |
| GlaxoSmithKline PLC ADR |
| Investment and Industrial |
GlaxoSmithKline PLC and Investment Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with GlaxoSmithKline PLC and Investment
The main advantage of trading using opposite GlaxoSmithKline PLC and Investment positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GlaxoSmithKline PLC position performs unexpectedly, Investment 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 Investment will offset losses from the drop in Investment'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 |
| Investment vs. FIT INVEST JSC | Investment vs. Damsan JSC | Investment vs. An Phat Plastic | Investment vs. APG Securities Joint |
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 Transaction History module to view history of all your transactions and understand their impact on performance.
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