Correlation Between GlaxoSmithKline PLC and Daikin IndustriesLtd
Can any of the company-specific risk be diversified away by investing in both GlaxoSmithKline PLC and Daikin IndustriesLtd 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 Daikin IndustriesLtd 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 Daikin IndustriesLtd, you can compare the effects of market volatilities on GlaxoSmithKline PLC and Daikin IndustriesLtd 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 Daikin IndustriesLtd. Check out your portfolio center. Please also check ongoing floating volatility patterns of GlaxoSmithKline PLC and Daikin IndustriesLtd.
Diversification Opportunities for GlaxoSmithKline PLC and Daikin IndustriesLtd
-0.15 | Correlation Coefficient |
Good diversification
The 3 months correlation between GlaxoSmithKline and Daikin is -0.15. Overlapping area represents the amount of risk that can be diversified away by holding GlaxoSmithKline PLC ADR and Daikin IndustriesLtd in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Daikin IndustriesLtd 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 Daikin IndustriesLtd. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Daikin IndustriesLtd has no effect on the direction of GlaxoSmithKline PLC i.e., GlaxoSmithKline PLC and Daikin IndustriesLtd go up and down completely randomly.
Pair Corralation between GlaxoSmithKline PLC and Daikin IndustriesLtd
Considering the 90-day investment horizon GlaxoSmithKline PLC ADR is expected to under-perform the Daikin IndustriesLtd. But the stock apears to be less risky and, when comparing its historical volatility, GlaxoSmithKline PLC ADR is 4.05 times less risky than Daikin IndustriesLtd. The stock trades about -0.34 of its potential returns per unit of risk. The Daikin IndustriesLtd is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest 11,960 in Daikin IndustriesLtd on August 24, 2024 and sell it today you would earn a total of 140.00 from holding Daikin IndustriesLtd or generate 1.17% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
GlaxoSmithKline PLC ADR vs. Daikin IndustriesLtd
Performance |
| Timeline |
| GlaxoSmithKline PLC ADR |
| Daikin IndustriesLtd |
GlaxoSmithKline PLC and Daikin IndustriesLtd Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with GlaxoSmithKline PLC and Daikin IndustriesLtd
The main advantage of trading using opposite GlaxoSmithKline PLC and Daikin IndustriesLtd positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GlaxoSmithKline PLC position performs unexpectedly, Daikin IndustriesLtd 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 Daikin IndustriesLtd will offset losses from the drop in Daikin IndustriesLtd'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 |
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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 Funds Screener module to find actively-traded funds from around the world traded on over 30 global exchanges.
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