Correlation Between GlaxoSmithKline PLC and Bayerische Motoren
Can any of the company-specific risk be diversified away by investing in both GlaxoSmithKline PLC and Bayerische Motoren 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 Bayerische Motoren 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 Bayerische Motoren Werke, you can compare the effects of market volatilities on GlaxoSmithKline PLC and Bayerische Motoren 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 Bayerische Motoren. Check out your portfolio center. Please also check ongoing floating volatility patterns of GlaxoSmithKline PLC and Bayerische Motoren.
Diversification Opportunities for GlaxoSmithKline PLC and Bayerische Motoren
0.8 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between GlaxoSmithKline and Bayerische is 0.8. Overlapping area represents the amount of risk that can be diversified away by holding GlaxoSmithKline PLC ADR and Bayerische Motoren Werke in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bayerische Motoren Werke 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 Bayerische Motoren. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Bayerische Motoren Werke has no effect on the direction of GlaxoSmithKline PLC i.e., GlaxoSmithKline PLC and Bayerische Motoren go up and down completely randomly.
Pair Corralation between GlaxoSmithKline PLC and Bayerische Motoren
Considering the 90-day investment horizon GlaxoSmithKline PLC ADR is expected to generate 0.8 times more return on investment than Bayerische Motoren. However, GlaxoSmithKline PLC ADR is 1.26 times less risky than Bayerische Motoren. It trades about 0.02 of its potential returns per unit of risk. Bayerische Motoren Werke is currently generating about -0.06 per unit of risk. If you would invest 3,273 in GlaxoSmithKline PLC ADR on August 31, 2024 and sell it today you would earn a total of 140.00 from holding GlaxoSmithKline PLC ADR or generate 4.28% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 99.73% |
| Values | Daily Returns |
GlaxoSmithKline PLC ADR vs. Bayerische Motoren Werke
Performance |
| Timeline |
| GlaxoSmithKline PLC ADR |
| Bayerische Motoren Werke |
GlaxoSmithKline PLC and Bayerische Motoren Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with GlaxoSmithKline PLC and Bayerische Motoren
The main advantage of trading using opposite GlaxoSmithKline PLC and Bayerische Motoren positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GlaxoSmithKline PLC position performs unexpectedly, Bayerische Motoren 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 Bayerische Motoren will offset losses from the drop in Bayerische Motoren'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 |
| Bayerische Motoren vs. Mercedes Benz Group AG | Bayerische Motoren vs. Porsche Automobile Holding | Bayerische Motoren vs. Volkswagen AG 110 | Bayerische Motoren vs. Mercedes Benz Group AG |
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 Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.
Other Complementary Tools
| Sync Your Broker Sync your existing holdings, watchlists, positions or portfolios from thousands of online brokerage services, banks, investment account aggregators and robo-advisors. | |
| Portfolio Optimization Compute new portfolio that will generate highest expected return given your specified tolerance for risk | |
| Pattern Recognition Use different Pattern Recognition models to time the market across multiple global exchanges | |
| Technical Analysis Check basic technical indicators and analysis based on most latest market data | |
| Stock Screener Find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook. |