Correlation Between GlaxoSmithKline PLC and Brighthouse Financial
Can any of the company-specific risk be diversified away by investing in both GlaxoSmithKline PLC and Brighthouse Financial 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 Brighthouse Financial 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 Brighthouse Financial, you can compare the effects of market volatilities on GlaxoSmithKline PLC and Brighthouse Financial 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 Brighthouse Financial. Check out your portfolio center. Please also check ongoing floating volatility patterns of GlaxoSmithKline PLC and Brighthouse Financial.
Diversification Opportunities for GlaxoSmithKline PLC and Brighthouse Financial
-0.14 | Correlation Coefficient |
Good diversification
The 3 months correlation between GlaxoSmithKline and Brighthouse is -0.14. Overlapping area represents the amount of risk that can be diversified away by holding GlaxoSmithKline PLC ADR and Brighthouse Financial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Brighthouse Financial 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 Brighthouse Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Brighthouse Financial has no effect on the direction of GlaxoSmithKline PLC i.e., GlaxoSmithKline PLC and Brighthouse Financial go up and down completely randomly.
Pair Corralation between GlaxoSmithKline PLC and Brighthouse Financial
Considering the 90-day investment horizon GlaxoSmithKline PLC ADR is expected to under-perform the Brighthouse Financial. In addition to that, GlaxoSmithKline PLC is 1.4 times more volatile than Brighthouse Financial. It trades about -0.3 of its total potential returns per unit of risk. Brighthouse Financial is currently generating about -0.2 per unit of volatility. If you would invest 2,035 in Brighthouse Financial on August 27, 2024 and sell it today you would lose (88.00) from holding Brighthouse Financial or give up 4.32% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
GlaxoSmithKline PLC ADR vs. Brighthouse Financial
Performance |
| Timeline |
| GlaxoSmithKline PLC ADR |
| Brighthouse Financial |
GlaxoSmithKline PLC and Brighthouse Financial Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with GlaxoSmithKline PLC and Brighthouse Financial
The main advantage of trading using opposite GlaxoSmithKline PLC and Brighthouse Financial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GlaxoSmithKline PLC position performs unexpectedly, Brighthouse Financial 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 Brighthouse Financial will offset losses from the drop in Brighthouse Financial'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 |
| Brighthouse Financial vs. Brighthouse Financial | Brighthouse Financial vs. Brighthouse Financial | Brighthouse Financial vs. Brighthouse Financial | Brighthouse Financial vs. First Citizens BancShares |
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 Anywhere module to track or share privately all of your investments from the convenience of any device.
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