Correlation Between GlaxoSmithKline PLC and Bright Horizons
Can any of the company-specific risk be diversified away by investing in both GlaxoSmithKline PLC and Bright Horizons 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 Bright Horizons 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 Bright Horizons Family, you can compare the effects of market volatilities on GlaxoSmithKline PLC and Bright Horizons 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 Bright Horizons. Check out your portfolio center. Please also check ongoing floating volatility patterns of GlaxoSmithKline PLC and Bright Horizons.
Diversification Opportunities for GlaxoSmithKline PLC and Bright Horizons
0.86 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between GlaxoSmithKline and Bright is 0.86. Overlapping area represents the amount of risk that can be diversified away by holding GlaxoSmithKline PLC ADR and Bright Horizons Family in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bright Horizons Family 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 Bright Horizons. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Bright Horizons Family has no effect on the direction of GlaxoSmithKline PLC i.e., GlaxoSmithKline PLC and Bright Horizons go up and down completely randomly.
Pair Corralation between GlaxoSmithKline PLC and Bright Horizons
Considering the 90-day investment horizon GlaxoSmithKline PLC is expected to generate 9.66 times less return on investment than Bright Horizons. But when comparing it to its historical volatility, GlaxoSmithKline PLC ADR is 1.73 times less risky than Bright Horizons. It trades about 0.01 of its potential returns per unit of risk. Bright Horizons Family is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest 6,525 in Bright Horizons Family on August 30, 2024 and sell it today you would earn a total of 5,000 from holding Bright Horizons Family or generate 76.63% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
GlaxoSmithKline PLC ADR vs. Bright Horizons Family
Performance |
| Timeline |
| GlaxoSmithKline PLC ADR |
| Bright Horizons Family |
GlaxoSmithKline PLC and Bright Horizons Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with GlaxoSmithKline PLC and Bright Horizons
The main advantage of trading using opposite GlaxoSmithKline PLC and Bright Horizons positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GlaxoSmithKline PLC position performs unexpectedly, Bright Horizons 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 Bright Horizons will offset losses from the drop in Bright Horizons' 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 |
| Bright Horizons vs. Frontdoor | Bright Horizons vs. Smart Share Global | Bright Horizons vs. Mister Car Wash | Bright Horizons vs. Carriage Services |
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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.
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