Correlation Between GlaxoSmithKline PLC and Cochlear
Can any of the company-specific risk be diversified away by investing in both GlaxoSmithKline PLC and Cochlear 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 Cochlear 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 Cochlear, you can compare the effects of market volatilities on GlaxoSmithKline PLC and Cochlear 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 Cochlear. Check out your portfolio center. Please also check ongoing floating volatility patterns of GlaxoSmithKline PLC and Cochlear.
Diversification Opportunities for GlaxoSmithKline PLC and Cochlear
-0.42 | Correlation Coefficient |
Very good diversification
The 3 months correlation between GlaxoSmithKline and Cochlear is -0.42. Overlapping area represents the amount of risk that can be diversified away by holding GlaxoSmithKline PLC ADR and Cochlear in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cochlear 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 Cochlear. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cochlear has no effect on the direction of GlaxoSmithKline PLC i.e., GlaxoSmithKline PLC and Cochlear go up and down completely randomly.
Pair Corralation between GlaxoSmithKline PLC and Cochlear
Considering the 90-day investment horizon GlaxoSmithKline PLC is expected to generate 4.07 times less return on investment than Cochlear. But when comparing it to its historical volatility, GlaxoSmithKline PLC ADR is 1.09 times less risky than Cochlear. It trades about 0.02 of its potential returns per unit of risk. Cochlear is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest 23,594 in Cochlear on August 31, 2024 and sell it today you would earn a total of 7,173 from holding Cochlear or generate 30.4% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 98.94% |
| Values | Daily Returns |
GlaxoSmithKline PLC ADR vs. Cochlear
Performance |
| Timeline |
| GlaxoSmithKline PLC ADR |
| Cochlear |
GlaxoSmithKline PLC and Cochlear Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with GlaxoSmithKline PLC and Cochlear
The main advantage of trading using opposite GlaxoSmithKline PLC and Cochlear positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GlaxoSmithKline PLC position performs unexpectedly, Cochlear 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 Cochlear will offset losses from the drop in Cochlear'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 |
| Cochlear vs. Aurelia Metals | Cochlear vs. Alto Metals | Cochlear vs. Richmond Vanadium Technology | Cochlear vs. Centuria Industrial Reit |
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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.
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