Correlation Between GlaxoSmithKline PLC and Direxion Daily
Can any of the company-specific risk be diversified away by investing in both GlaxoSmithKline PLC and Direxion Daily 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 Direxion Daily 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 Direxion Daily MSCI, you can compare the effects of market volatilities on GlaxoSmithKline PLC and Direxion Daily 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 Direxion Daily. Check out your portfolio center. Please also check ongoing floating volatility patterns of GlaxoSmithKline PLC and Direxion Daily.
Diversification Opportunities for GlaxoSmithKline PLC and Direxion Daily
-0.02 | Correlation Coefficient |
Good diversification
The 3 months correlation between GlaxoSmithKline and Direxion is -0.02. Overlapping area represents the amount of risk that can be diversified away by holding GlaxoSmithKline PLC ADR and Direxion Daily MSCI in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Direxion Daily MSCI 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 Direxion Daily. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Direxion Daily MSCI has no effect on the direction of GlaxoSmithKline PLC i.e., GlaxoSmithKline PLC and Direxion Daily go up and down completely randomly.
Pair Corralation between GlaxoSmithKline PLC and Direxion Daily
Considering the 90-day investment horizon GlaxoSmithKline PLC is expected to generate 2.6 times less return on investment than Direxion Daily. But when comparing it to its historical volatility, GlaxoSmithKline PLC ADR is 2.24 times less risky than Direxion Daily. It trades about 0.02 of its potential returns per unit of risk. Direxion Daily MSCI is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest 2,972 in Direxion Daily MSCI on August 31, 2024 and sell it today you would earn a total of 96.00 from holding Direxion Daily MSCI or generate 3.23% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 99.73% |
| Values | Daily Returns |
GlaxoSmithKline PLC ADR vs. Direxion Daily MSCI
Performance |
| Timeline |
| GlaxoSmithKline PLC ADR |
| Direxion Daily MSCI |
GlaxoSmithKline PLC and Direxion Daily Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with GlaxoSmithKline PLC and Direxion Daily
The main advantage of trading using opposite GlaxoSmithKline PLC and Direxion Daily positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GlaxoSmithKline PLC position performs unexpectedly, Direxion Daily 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 Direxion Daily will offset losses from the drop in Direxion Daily'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 |
| Direxion Daily vs. Direxion Daily MSCI | Direxion Daily vs. Innovator MSCI Emerging | Direxion Daily vs. Innovator ETFs Trust | Direxion Daily vs. Innovator MSCI Emerging |
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 Equity Search module to search for actively traded equities including funds and ETFs from over 30 global markets.
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