Correlation Between GlaxoSmithKline PLC and Essential
Can any of the company-specific risk be diversified away by investing in both GlaxoSmithKline PLC and Essential 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 Essential 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 Essential 40 Stock, you can compare the effects of market volatilities on GlaxoSmithKline PLC and Essential 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 Essential. Check out your portfolio center. Please also check ongoing floating volatility patterns of GlaxoSmithKline PLC and Essential.
Diversification Opportunities for GlaxoSmithKline PLC and Essential
0.54 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between GlaxoSmithKline and Essential is 0.54. Overlapping area represents the amount of risk that can be diversified away by holding GlaxoSmithKline PLC ADR and Essential 40 Stock in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Essential 40 Stock 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 Essential. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Essential 40 Stock has no effect on the direction of GlaxoSmithKline PLC i.e., GlaxoSmithKline PLC and Essential go up and down completely randomly.
Pair Corralation between GlaxoSmithKline PLC and Essential
Considering the 90-day investment horizon GlaxoSmithKline PLC ADR is expected to under-perform the Essential. In addition to that, GlaxoSmithKline PLC is 2.02 times more volatile than Essential 40 Stock. It trades about -0.3 of its total potential returns per unit of risk. Essential 40 Stock is currently generating about 0.24 per unit of volatility. If you would invest 1,518 in Essential 40 Stock on August 30, 2024 and sell it today you would earn a total of 54.00 from holding Essential 40 Stock or generate 3.56% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
GlaxoSmithKline PLC ADR vs. Essential 40 Stock
Performance |
| Timeline |
| GlaxoSmithKline PLC ADR |
| Essential 40 Stock |
GlaxoSmithKline PLC and Essential Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with GlaxoSmithKline PLC and Essential
The main advantage of trading using opposite GlaxoSmithKline PLC and Essential positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GlaxoSmithKline PLC position performs unexpectedly, Essential 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 Essential will offset losses from the drop in Essential'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 |
| Essential vs. Vanguard Total Stock | Essential vs. SPDR SP 500 | Essential vs. iShares Core SP | Essential vs. Vanguard Total Bond |
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 Commodity Directory module to find actively traded commodities issued by global exchanges.
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