Correlation Between GlaxoSmithKline PLC and COSMO Pharmaceuticals
Can any of the company-specific risk be diversified away by investing in both GlaxoSmithKline PLC and COSMO Pharmaceuticals 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 COSMO Pharmaceuticals 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 COSMO Pharmaceuticals SA, you can compare the effects of market volatilities on GlaxoSmithKline PLC and COSMO Pharmaceuticals 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 COSMO Pharmaceuticals. Check out your portfolio center. Please also check ongoing floating volatility patterns of GlaxoSmithKline PLC and COSMO Pharmaceuticals.
Diversification Opportunities for GlaxoSmithKline PLC and COSMO Pharmaceuticals
0.94 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between GlaxoSmithKline and COSMO is 0.94. Overlapping area represents the amount of risk that can be diversified away by holding GlaxoSmithKline PLC ADR and COSMO Pharmaceuticals SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on COSMO Pharmaceuticals 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 COSMO Pharmaceuticals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of COSMO Pharmaceuticals has no effect on the direction of GlaxoSmithKline PLC i.e., GlaxoSmithKline PLC and COSMO Pharmaceuticals go up and down completely randomly.
Pair Corralation between GlaxoSmithKline PLC and COSMO Pharmaceuticals
Considering the 90-day investment horizon GlaxoSmithKline PLC ADR is expected to generate 1.53 times more return on investment than COSMO Pharmaceuticals. However, GlaxoSmithKline PLC is 1.53 times more volatile than COSMO Pharmaceuticals SA. It trades about -0.24 of its potential returns per unit of risk. COSMO Pharmaceuticals SA is currently generating about -0.43 per unit of risk. If you would invest 4,025 in GlaxoSmithKline PLC ADR on August 28, 2024 and sell it today you would lose (623.00) from holding GlaxoSmithKline PLC ADR or give up 15.48% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
GlaxoSmithKline PLC ADR vs. COSMO Pharmaceuticals SA
Performance |
| Timeline |
| GlaxoSmithKline PLC ADR |
| COSMO Pharmaceuticals |
GlaxoSmithKline PLC and COSMO Pharmaceuticals Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with GlaxoSmithKline PLC and COSMO Pharmaceuticals
The main advantage of trading using opposite GlaxoSmithKline PLC and COSMO Pharmaceuticals positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GlaxoSmithKline PLC position performs unexpectedly, COSMO Pharmaceuticals 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 COSMO Pharmaceuticals will offset losses from the drop in COSMO Pharmaceuticals' 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 |
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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.
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