Correlation Between GlaxoSmithKline PLC and DTE Energy
Can any of the company-specific risk be diversified away by investing in both GlaxoSmithKline PLC and DTE Energy 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 DTE Energy 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 DTE Energy, you can compare the effects of market volatilities on GlaxoSmithKline PLC and DTE Energy 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 DTE Energy. Check out your portfolio center. Please also check ongoing floating volatility patterns of GlaxoSmithKline PLC and DTE Energy.
Diversification Opportunities for GlaxoSmithKline PLC and DTE Energy
0.26 | Correlation Coefficient |
Modest diversification
The 3 months correlation between GlaxoSmithKline and DTE is 0.26. Overlapping area represents the amount of risk that can be diversified away by holding GlaxoSmithKline PLC ADR and DTE Energy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on DTE Energy 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 DTE Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of DTE Energy has no effect on the direction of GlaxoSmithKline PLC i.e., GlaxoSmithKline PLC and DTE Energy go up and down completely randomly.
Pair Corralation between GlaxoSmithKline PLC and DTE Energy
Considering the 90-day investment horizon GlaxoSmithKline PLC ADR is expected to under-perform the DTE Energy. But the stock apears to be less risky and, when comparing its historical volatility, GlaxoSmithKline PLC ADR is 1.01 times less risky than DTE Energy. The stock trades about -0.23 of its potential returns per unit of risk. The DTE Energy is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest 12,414 in DTE Energy on August 31, 2024 and sell it today you would earn a total of 194.00 from holding DTE Energy or generate 1.56% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
GlaxoSmithKline PLC ADR vs. DTE Energy
Performance |
| Timeline |
| GlaxoSmithKline PLC ADR |
| DTE Energy |
GlaxoSmithKline PLC and DTE Energy Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with GlaxoSmithKline PLC and DTE Energy
The main advantage of trading using opposite GlaxoSmithKline PLC and DTE Energy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GlaxoSmithKline PLC position performs unexpectedly, DTE Energy 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 DTE Energy will offset losses from the drop in DTE Energy'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 |
| DTE Energy vs. CenterPoint Energy | DTE Energy vs. CMS Energy | DTE Energy vs. IDACORP | DTE Energy vs. Portland General Electric |
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 Global Markets Map module to get a quick overview of global market snapshot using zoomable world map. Drill down to check world indexes.
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