Correlation Between GlaxoSmithKline PLC and Compass Group
Can any of the company-specific risk be diversified away by investing in both GlaxoSmithKline PLC and Compass Group 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 Compass Group 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 Compass Group PLC, you can compare the effects of market volatilities on GlaxoSmithKline PLC and Compass Group 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 Compass Group. Check out your portfolio center. Please also check ongoing floating volatility patterns of GlaxoSmithKline PLC and Compass Group.
Diversification Opportunities for GlaxoSmithKline PLC and Compass Group
-0.82 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between GlaxoSmithKline and Compass is -0.82. Overlapping area represents the amount of risk that can be diversified away by holding GlaxoSmithKline PLC ADR and Compass Group PLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Compass Group PLC 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 Compass Group. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Compass Group PLC has no effect on the direction of GlaxoSmithKline PLC i.e., GlaxoSmithKline PLC and Compass Group go up and down completely randomly.
Pair Corralation between GlaxoSmithKline PLC and Compass Group
Considering the 90-day investment horizon GlaxoSmithKline PLC ADR is expected to under-perform the Compass Group. In addition to that, GlaxoSmithKline PLC is 1.72 times more volatile than Compass Group PLC. It trades about -0.3 of its total potential returns per unit of risk. Compass Group PLC is currently generating about 0.39 per unit of volatility. If you would invest 253,000 in Compass Group PLC on August 30, 2024 and sell it today you would earn a total of 17,600 from holding Compass Group PLC or generate 6.96% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
GlaxoSmithKline PLC ADR vs. Compass Group PLC
Performance |
| Timeline |
| GlaxoSmithKline PLC ADR |
| Compass Group PLC |
GlaxoSmithKline PLC and Compass Group Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with GlaxoSmithKline PLC and Compass Group
The main advantage of trading using opposite GlaxoSmithKline PLC and Compass Group positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GlaxoSmithKline PLC position performs unexpectedly, Compass Group 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 Compass Group will offset losses from the drop in Compass Group'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 |
| Compass Group vs. Fresenius Medical Care | Compass Group vs. Albion Technology General | Compass Group vs. DXC Technology Co | Compass Group vs. Monster Beverage Corp |
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 ETF Categories module to list of ETF categories grouped based on various criteria, such as the investment strategy or type of investments.
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