Correlation Between GlaxoSmithKline PLC and SPDR EURO
Can any of the company-specific risk be diversified away by investing in both GlaxoSmithKline PLC and SPDR EURO 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 SPDR EURO 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 SPDR EURO STOXX, you can compare the effects of market volatilities on GlaxoSmithKline PLC and SPDR EURO 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 SPDR EURO. Check out your portfolio center. Please also check ongoing floating volatility patterns of GlaxoSmithKline PLC and SPDR EURO.
Diversification Opportunities for GlaxoSmithKline PLC and SPDR EURO
0.69 | Correlation Coefficient |
Poor diversification
The 3 months correlation between GlaxoSmithKline and SPDR is 0.69. Overlapping area represents the amount of risk that can be diversified away by holding GlaxoSmithKline PLC ADR and SPDR EURO STOXX in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SPDR EURO STOXX 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 SPDR EURO. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SPDR EURO STOXX has no effect on the direction of GlaxoSmithKline PLC i.e., GlaxoSmithKline PLC and SPDR EURO go up and down completely randomly.
Pair Corralation between GlaxoSmithKline PLC and SPDR EURO
Considering the 90-day investment horizon GlaxoSmithKline PLC ADR is expected to under-perform the SPDR EURO. In addition to that, GlaxoSmithKline PLC is 1.36 times more volatile than SPDR EURO STOXX. It trades about -0.3 of its total potential returns per unit of risk. SPDR EURO STOXX is currently generating about -0.3 per unit of volatility. If you would invest 5,130 in SPDR EURO STOXX on August 28, 2024 and sell it today you would lose (335.00) from holding SPDR EURO STOXX or give up 6.53% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
GlaxoSmithKline PLC ADR vs. SPDR EURO STOXX
Performance |
| Timeline |
| GlaxoSmithKline PLC ADR |
| SPDR EURO STOXX |
GlaxoSmithKline PLC and SPDR EURO Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with GlaxoSmithKline PLC and SPDR EURO
The main advantage of trading using opposite GlaxoSmithKline PLC and SPDR EURO positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GlaxoSmithKline PLC position performs unexpectedly, SPDR EURO 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 SPDR EURO will offset losses from the drop in SPDR EURO'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 |
| SPDR EURO vs. iShares MSCI Eurozone | SPDR EURO vs. iShares MSCI Germany | SPDR EURO vs. iShares MSCI United | SPDR EURO vs. iShares Europe ETF |
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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.
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