Correlation Between GlaxoSmithKline PLC and Equity Residential
Can any of the company-specific risk be diversified away by investing in both GlaxoSmithKline PLC and Equity Residential 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 Equity Residential 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 Equity Residential, you can compare the effects of market volatilities on GlaxoSmithKline PLC and Equity Residential 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 Equity Residential. Check out your portfolio center. Please also check ongoing floating volatility patterns of GlaxoSmithKline PLC and Equity Residential.
Diversification Opportunities for GlaxoSmithKline PLC and Equity Residential
0.3 | Correlation Coefficient |
Weak diversification
The 3 months correlation between GlaxoSmithKline and Equity is 0.3. Overlapping area represents the amount of risk that can be diversified away by holding GlaxoSmithKline PLC ADR and Equity Residential in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Equity Residential 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 Equity Residential. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Equity Residential has no effect on the direction of GlaxoSmithKline PLC i.e., GlaxoSmithKline PLC and Equity Residential go up and down completely randomly.
Pair Corralation between GlaxoSmithKline PLC and Equity Residential
Considering the 90-day investment horizon GlaxoSmithKline PLC is expected to generate 3.86 times less return on investment than Equity Residential. But when comparing it to its historical volatility, GlaxoSmithKline PLC ADR is 1.02 times less risky than Equity Residential. It trades about 0.02 of its potential returns per unit of risk. Equity Residential is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest 5,516 in Equity Residential on August 28, 2024 and sell it today you would earn a total of 2,125 from holding Equity Residential or generate 38.52% 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. Equity Residential
Performance |
| Timeline |
| GlaxoSmithKline PLC ADR |
| Equity Residential |
GlaxoSmithKline PLC and Equity Residential Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with GlaxoSmithKline PLC and Equity Residential
The main advantage of trading using opposite GlaxoSmithKline PLC and Equity Residential positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GlaxoSmithKline PLC position performs unexpectedly, Equity Residential 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 Equity Residential will offset losses from the drop in Equity Residential'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 |
| Equity Residential vs. Essex Property Trust | Equity Residential vs. Mid America Apartment Communities | Equity Residential vs. Camden Property Trust | Equity Residential vs. UDR Inc |
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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.
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