Correlation Between GlaxoSmithKline PLC and Dow Jones
Can any of the company-specific risk be diversified away by investing in both GlaxoSmithKline PLC and Dow Jones 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 Dow Jones 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 Dow Jones Industrial, you can compare the effects of market volatilities on GlaxoSmithKline PLC and Dow Jones 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 Dow Jones. Check out your portfolio center. Please also check ongoing floating volatility patterns of GlaxoSmithKline PLC and Dow Jones.
Diversification Opportunities for GlaxoSmithKline PLC and Dow Jones
-0.85 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between GlaxoSmithKline and Dow is -0.85. Overlapping area represents the amount of risk that can be diversified away by holding GlaxoSmithKline PLC ADR and Dow Jones Industrial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dow Jones Industrial 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 Dow Jones. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dow Jones Industrial has no effect on the direction of GlaxoSmithKline PLC i.e., GlaxoSmithKline PLC and Dow Jones go up and down completely randomly.
Pair Corralation between GlaxoSmithKline PLC and Dow Jones
Considering the 90-day investment horizon GlaxoSmithKline PLC ADR is expected to under-perform the Dow Jones. In addition to that, GlaxoSmithKline PLC is 1.42 times more volatile than Dow Jones Industrial. It trades about -0.33 of its total potential returns per unit of risk. Dow Jones Industrial is currently generating about 0.22 per unit of volatility. If you would invest 4,238,757 in Dow Jones Industrial on August 27, 2024 and sell it today you would earn a total of 190,894 from holding Dow Jones Industrial or generate 4.5% 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. Dow Jones Industrial
Performance |
| Timeline |
GlaxoSmithKline PLC and Dow Jones Volatility Contrast
Predicted Return Density |
| Returns |
GlaxoSmithKline PLC ADR
Pair trading matchups for GlaxoSmithKline PLC
Dow Jones Industrial
Pair trading matchups for Dow Jones
Pair Trading with GlaxoSmithKline PLC and Dow Jones
The main advantage of trading using opposite GlaxoSmithKline PLC and Dow Jones positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GlaxoSmithKline PLC position performs unexpectedly, Dow Jones 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 Dow Jones will offset losses from the drop in Dow Jones' 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 |
| Dow Jones vs. Meiwu Technology Co | Dow Jones vs. 17 Education Technology | Dow Jones vs. 51Talk Online Education | Dow Jones vs. Afya |
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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.
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