Correlation Between GlaxoSmithKline PLC and China Health
Can any of the company-specific risk be diversified away by investing in both GlaxoSmithKline PLC and China Health 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 Health 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 Health Management, you can compare the effects of market volatilities on GlaxoSmithKline PLC and China Health 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 Health. Check out your portfolio center. Please also check ongoing floating volatility patterns of GlaxoSmithKline PLC and China Health.
Diversification Opportunities for GlaxoSmithKline PLC and China Health
0.66 | Correlation Coefficient |
Poor diversification
The 3 months correlation between GlaxoSmithKline and China is 0.66. Overlapping area represents the amount of risk that can be diversified away by holding GlaxoSmithKline PLC ADR and China Health Management in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on China Health Management 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 Health. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of China Health Management has no effect on the direction of GlaxoSmithKline PLC i.e., GlaxoSmithKline PLC and China Health go up and down completely randomly.
Pair Corralation between GlaxoSmithKline PLC and China Health
Considering the 90-day investment horizon GlaxoSmithKline PLC ADR is expected to under-perform the China Health. But the stock apears to be less risky and, when comparing its historical volatility, GlaxoSmithKline PLC ADR is 3.46 times less risky than China Health. The stock trades about -0.24 of its potential returns per unit of risk. The China Health Management is currently generating about 0.19 of returns per unit of risk over similar time horizon. If you would invest 0.41 in China Health Management on August 26, 2024 and sell it today you would earn a total of 0.20 from holding China Health Management or generate 48.78% 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. China Health Management
Performance |
| Timeline |
| GlaxoSmithKline PLC ADR |
| China Health Management |
GlaxoSmithKline PLC and China Health Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with GlaxoSmithKline PLC and China Health
The main advantage of trading using opposite GlaxoSmithKline PLC and China Health positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GlaxoSmithKline PLC position performs unexpectedly, China Health 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 Health will offset losses from the drop in China Health'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 Health vs. Boxlight Corp Class | China Health vs. Siyata Mobile | China Health vs. ClearOne | China Health vs. HUMANA INC |
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 Cryptocurrency Center module to build and monitor diversified portfolio of extremely risky digital assets and cryptocurrency.
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