Correlation Between GlaxoSmithKline PLC and CNA Financial
Can any of the company-specific risk be diversified away by investing in both GlaxoSmithKline PLC and CNA 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 CNA 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 CNA Financial, you can compare the effects of market volatilities on GlaxoSmithKline PLC and CNA 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 CNA Financial. Check out your portfolio center. Please also check ongoing floating volatility patterns of GlaxoSmithKline PLC and CNA Financial.
Diversification Opportunities for GlaxoSmithKline PLC and CNA Financial
0.63 | Correlation Coefficient |
Poor diversification
The 3 months correlation between GlaxoSmithKline and CNA is 0.63. Overlapping area represents the amount of risk that can be diversified away by holding GlaxoSmithKline PLC ADR and CNA Financial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CNA 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 CNA Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CNA Financial has no effect on the direction of GlaxoSmithKline PLC i.e., GlaxoSmithKline PLC and CNA Financial go up and down completely randomly.
Pair Corralation between GlaxoSmithKline PLC and CNA Financial
Considering the 90-day investment horizon GlaxoSmithKline PLC ADR is expected to under-perform the CNA Financial. In addition to that, GlaxoSmithKline PLC is 1.15 times more volatile than CNA Financial. It trades about -0.3 of its total potential returns per unit of risk. CNA Financial is currently generating about 0.09 per unit of volatility. If you would invest 4,866 in CNA Financial on August 27, 2024 and sell it today you would earn a total of 106.00 from holding CNA Financial or generate 2.18% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
GlaxoSmithKline PLC ADR vs. CNA Financial
Performance |
| Timeline |
| GlaxoSmithKline PLC ADR |
| CNA Financial |
GlaxoSmithKline PLC and CNA Financial Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with GlaxoSmithKline PLC and CNA Financial
The main advantage of trading using opposite GlaxoSmithKline PLC and CNA Financial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GlaxoSmithKline PLC position performs unexpectedly, CNA 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 CNA Financial will offset losses from the drop in CNA 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 |
| CNA Financial vs. Selective Insurance Group | CNA Financial vs. Kemper | CNA Financial vs. Donegal Group B | CNA Financial vs. Argo Group International |
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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.
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