Correlation Between GlaxoSmithKline PLC and Alerian Energy
Can any of the company-specific risk be diversified away by investing in both GlaxoSmithKline PLC and Alerian 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 Alerian 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 Alerian Energy Infrastructure, you can compare the effects of market volatilities on GlaxoSmithKline PLC and Alerian 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 Alerian Energy. Check out your portfolio center. Please also check ongoing floating volatility patterns of GlaxoSmithKline PLC and Alerian Energy.
Diversification Opportunities for GlaxoSmithKline PLC and Alerian Energy
0.09 | Correlation Coefficient |
Significant diversification
The 3 months correlation between GlaxoSmithKline and Alerian is 0.09. Overlapping area represents the amount of risk that can be diversified away by holding GlaxoSmithKline PLC ADR and Alerian Energy Infrastructure in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Alerian Energy Infra 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 Alerian Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Alerian Energy Infra has no effect on the direction of GlaxoSmithKline PLC i.e., GlaxoSmithKline PLC and Alerian Energy go up and down completely randomly.
Pair Corralation between GlaxoSmithKline PLC and Alerian Energy
Considering the 90-day investment horizon GlaxoSmithKline PLC ADR is expected to generate 1.67 times more return on investment than Alerian Energy. However, GlaxoSmithKline PLC is 1.67 times more volatile than Alerian Energy Infrastructure. It trades about 0.18 of its potential returns per unit of risk. Alerian Energy Infrastructure is currently generating about -0.11 per unit of risk. If you would invest 3,343 in GlaxoSmithKline PLC ADR on November 18, 2024 and sell it today you would earn a total of 274.00 from holding GlaxoSmithKline PLC ADR or generate 8.2% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
GlaxoSmithKline PLC ADR vs. Alerian Energy Infrastructure
Performance |
| Timeline |
| GlaxoSmithKline PLC ADR |
| Alerian Energy Infra |
GlaxoSmithKline PLC and Alerian Energy Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with GlaxoSmithKline PLC and Alerian Energy
The main advantage of trading using opposite GlaxoSmithKline PLC and Alerian Energy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GlaxoSmithKline PLC position performs unexpectedly, Alerian 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 Alerian Energy will offset losses from the drop in Alerian 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 |
| Alerian Energy vs. Global X MLP | Alerian Energy vs. Tortoise North American | Alerian Energy vs. First Trust North | Alerian Energy vs. Global X MLP |
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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.
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