Correlation Between GlaxoSmithKline PLC and East Japan
Can any of the company-specific risk be diversified away by investing in both GlaxoSmithKline PLC and East Japan 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 East Japan 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 East Japan Railway, you can compare the effects of market volatilities on GlaxoSmithKline PLC and East Japan 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 East Japan. Check out your portfolio center. Please also check ongoing floating volatility patterns of GlaxoSmithKline PLC and East Japan.
Diversification Opportunities for GlaxoSmithKline PLC and East Japan
0.5 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between GlaxoSmithKline and East is 0.5. Overlapping area represents the amount of risk that can be diversified away by holding GlaxoSmithKline PLC ADR and East Japan Railway in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on East Japan Railway 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 East Japan. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of East Japan Railway has no effect on the direction of GlaxoSmithKline PLC i.e., GlaxoSmithKline PLC and East Japan go up and down completely randomly.
Pair Corralation between GlaxoSmithKline PLC and East Japan
Considering the 90-day investment horizon GlaxoSmithKline PLC ADR is expected to under-perform the East Japan. But the stock apears to be less risky and, when comparing its historical volatility, GlaxoSmithKline PLC ADR is 1.05 times less risky than East Japan. The stock trades about -0.31 of its potential returns per unit of risk. The East Japan Railway is currently generating about -0.2 of returns per unit of risk over similar time horizon. If you would invest 981.00 in East Japan Railway on August 29, 2024 and sell it today you would lose (63.00) from holding East Japan Railway or give up 6.42% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
GlaxoSmithKline PLC ADR vs. East Japan Railway
Performance |
| Timeline |
| GlaxoSmithKline PLC ADR |
| East Japan Railway |
GlaxoSmithKline PLC and East Japan Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with GlaxoSmithKline PLC and East Japan
The main advantage of trading using opposite GlaxoSmithKline PLC and East Japan positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GlaxoSmithKline PLC position performs unexpectedly, East Japan 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 East Japan will offset losses from the drop in East Japan'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 |
| East Japan vs. Central Japan Railway | East Japan vs. LB Foster | East Japan vs. Canadian National Railway | East Japan vs. West Japan Railway |
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 Crypto Correlations module to use cryptocurrency correlation module to diversify your cryptocurrency portfolio across multiple coins.
Other Complementary Tools
| Premium Stories Follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope | |
| Content Syndication Quickly integrate customizable finance content to your own investment portal | |
| Efficient Frontier Plot and analyze your portfolio and positions against risk-return landscape of the market. | |
| Portfolio Rebalancing Analyze risk-adjusted returns against different time horizons to find asset-allocation targets | |
| Portfolio Center All portfolio management and optimization tools to improve performance of your portfolios |