Correlation Between GlaxoSmithKline PLC and Equifax
Can any of the company-specific risk be diversified away by investing in both GlaxoSmithKline PLC and Equifax 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 Equifax 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 Equifax, you can compare the effects of market volatilities on GlaxoSmithKline PLC and Equifax 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 Equifax. Check out your portfolio center. Please also check ongoing floating volatility patterns of GlaxoSmithKline PLC and Equifax.
Diversification Opportunities for GlaxoSmithKline PLC and Equifax
0.9 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between GlaxoSmithKline and Equifax is 0.9. Overlapping area represents the amount of risk that can be diversified away by holding GlaxoSmithKline PLC ADR and Equifax in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Equifax 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 Equifax. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Equifax has no effect on the direction of GlaxoSmithKline PLC i.e., GlaxoSmithKline PLC and Equifax go up and down completely randomly.
Pair Corralation between GlaxoSmithKline PLC and Equifax
Considering the 90-day investment horizon GlaxoSmithKline PLC is expected to generate 3.5 times less return on investment than Equifax. But when comparing it to its historical volatility, GlaxoSmithKline PLC ADR is 1.46 times less risky than Equifax. It trades about 0.02 of its potential returns per unit of risk. Equifax is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest 20,422 in Equifax on August 31, 2024 and sell it today you would earn a total of 4,378 from holding Equifax or generate 21.44% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 98.16% |
| Values | Daily Returns |
GlaxoSmithKline PLC ADR vs. Equifax
Performance |
| Timeline |
| GlaxoSmithKline PLC ADR |
| Equifax |
GlaxoSmithKline PLC and Equifax Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with GlaxoSmithKline PLC and Equifax
The main advantage of trading using opposite GlaxoSmithKline PLC and Equifax positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GlaxoSmithKline PLC position performs unexpectedly, Equifax 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 Equifax will offset losses from the drop in Equifax'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 |
| Equifax vs. Automatic Data Processing | Equifax vs. Superior Plus Corp | Equifax vs. NMI Holdings | Equifax vs. Origin Agritech |
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 Valuation module to check real value of public entities based on technical and fundamental data.
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