Correlation Between GlaxoSmithKline PLC and Cisco Systems
Can any of the company-specific risk be diversified away by investing in both GlaxoSmithKline PLC and Cisco Systems 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 Cisco Systems 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 Cisco Systems, you can compare the effects of market volatilities on GlaxoSmithKline PLC and Cisco Systems 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 Cisco Systems. Check out your portfolio center. Please also check ongoing floating volatility patterns of GlaxoSmithKline PLC and Cisco Systems.
Diversification Opportunities for GlaxoSmithKline PLC and Cisco Systems
-0.93 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between GlaxoSmithKline and Cisco is -0.93. Overlapping area represents the amount of risk that can be diversified away by holding GlaxoSmithKline PLC ADR and Cisco Systems in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cisco Systems 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 Cisco Systems. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cisco Systems has no effect on the direction of GlaxoSmithKline PLC i.e., GlaxoSmithKline PLC and Cisco Systems go up and down completely randomly.
Pair Corralation between GlaxoSmithKline PLC and Cisco Systems
Considering the 90-day investment horizon GlaxoSmithKline PLC ADR is expected to under-perform the Cisco Systems. In addition to that, GlaxoSmithKline PLC is 1.03 times more volatile than Cisco Systems. It trades about -0.23 of its total potential returns per unit of risk. Cisco Systems is currently generating about 0.28 per unit of volatility. If you would invest 103,200 in Cisco Systems on August 30, 2024 and sell it today you would earn a total of 19,643 from holding Cisco Systems or generate 19.03% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Significant |
| Accuracy | 95.45% |
| Values | Daily Returns |
GlaxoSmithKline PLC ADR vs. Cisco Systems
Performance |
| Timeline |
| GlaxoSmithKline PLC ADR |
| Cisco Systems |
GlaxoSmithKline PLC and Cisco Systems Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with GlaxoSmithKline PLC and Cisco Systems
The main advantage of trading using opposite GlaxoSmithKline PLC and Cisco Systems positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GlaxoSmithKline PLC position performs unexpectedly, Cisco Systems 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 Cisco Systems will offset losses from the drop in Cisco Systems' 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 |
| Cisco Systems vs. McEwen Mining | Cisco Systems vs. Cognizant Technology Solutions | Cisco Systems vs. Costco Wholesale | Cisco Systems vs. Grupo Carso SAB |
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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.
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