Correlation Between GlaxoSmithKline PLC and China Citic
Can any of the company-specific risk be diversified away by investing in both GlaxoSmithKline PLC and China Citic 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 China Citic 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 China Citic Bank, you can compare the effects of market volatilities on GlaxoSmithKline PLC and China Citic 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 China Citic. Check out your portfolio center. Please also check ongoing floating volatility patterns of GlaxoSmithKline PLC and China Citic.
Diversification Opportunities for GlaxoSmithKline PLC and China Citic
-0.13 | Correlation Coefficient |
Good diversification
The 3 months correlation between GlaxoSmithKline and China is -0.13. Overlapping area represents the amount of risk that can be diversified away by holding GlaxoSmithKline PLC ADR and China Citic Bank in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on China Citic Bank 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 China Citic. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of China Citic Bank has no effect on the direction of GlaxoSmithKline PLC i.e., GlaxoSmithKline PLC and China Citic go up and down completely randomly.
Pair Corralation between GlaxoSmithKline PLC and China Citic
Considering the 90-day investment horizon GlaxoSmithKline PLC ADR is expected to under-perform the China Citic. But the stock apears to be less risky and, when comparing its historical volatility, GlaxoSmithKline PLC ADR is 6.19 times less risky than China Citic. The stock trades about -0.3 of its potential returns per unit of risk. The China Citic Bank is currently generating about -0.05 of returns per unit of risk over similar time horizon. If you would invest 1,358 in China Citic Bank on August 28, 2024 and sell it today you would lose (198.00) from holding China Citic Bank or give up 14.58% 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. China Citic Bank
Performance |
| Timeline |
| GlaxoSmithKline PLC ADR |
| China Citic Bank |
GlaxoSmithKline PLC and China Citic Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with GlaxoSmithKline PLC and China Citic
The main advantage of trading using opposite GlaxoSmithKline PLC and China Citic positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GlaxoSmithKline PLC position performs unexpectedly, China Citic 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 China Citic will offset losses from the drop in China Citic'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 |
| China Citic vs. China Everbright Bank | China Citic vs. China Merchants Bank | China Citic vs. Postal Savings Bank | China Citic vs. China Merchants Bank |
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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.
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