Correlation Between GlaxoSmithKline PLC and China Resources
Can any of the company-specific risk be diversified away by investing in both GlaxoSmithKline PLC and China Resources 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 Resources 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 Resources Land, you can compare the effects of market volatilities on GlaxoSmithKline PLC and China Resources 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 Resources. Check out your portfolio center. Please also check ongoing floating volatility patterns of GlaxoSmithKline PLC and China Resources.
Diversification Opportunities for GlaxoSmithKline PLC and China Resources
-0.72 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between GlaxoSmithKline and China is -0.72. Overlapping area represents the amount of risk that can be diversified away by holding GlaxoSmithKline PLC ADR and China Resources Land in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on China Resources Land 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 Resources. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of China Resources Land has no effect on the direction of GlaxoSmithKline PLC i.e., GlaxoSmithKline PLC and China Resources go up and down completely randomly.
Pair Corralation between GlaxoSmithKline PLC and China Resources
Considering the 90-day investment horizon GlaxoSmithKline PLC ADR is expected to under-perform the China Resources. But the stock apears to be less risky and, when comparing its historical volatility, GlaxoSmithKline PLC ADR is 1.51 times less risky than China Resources. The stock trades about -0.31 of its potential returns per unit of risk. The China Resources Land is currently generating about -0.14 of returns per unit of risk over similar time horizon. If you would invest 3,260 in China Resources Land on August 28, 2024 and sell it today you would lose (222.00) from holding China Resources Land or give up 6.81% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
GlaxoSmithKline PLC ADR vs. China Resources Land
Performance |
| Timeline |
| GlaxoSmithKline PLC ADR |
| China Resources Land |
GlaxoSmithKline PLC and China Resources Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with GlaxoSmithKline PLC and China Resources
The main advantage of trading using opposite GlaxoSmithKline PLC and China Resources positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GlaxoSmithKline PLC position performs unexpectedly, China Resources 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 Resources will offset losses from the drop in China Resources' 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 Resources vs. China Overseas Land | China Resources vs. Longfor Group Holdings | China Resources vs. Sun Hung Kai | China Resources vs. Country Garden Holdings |
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 Portfolio Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.
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