Correlation Between GlaxoSmithKline PLC and Small Cap
Can any of the company-specific risk be diversified away by investing in both GlaxoSmithKline PLC and Small Cap 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 Small Cap 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 Small Cap Equity, you can compare the effects of market volatilities on GlaxoSmithKline PLC and Small Cap 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 Small Cap. Check out your portfolio center. Please also check ongoing floating volatility patterns of GlaxoSmithKline PLC and Small Cap.
Diversification Opportunities for GlaxoSmithKline PLC and Small Cap
-0.8 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between GlaxoSmithKline and Small is -0.8. Overlapping area represents the amount of risk that can be diversified away by holding GlaxoSmithKline PLC ADR and Small Cap Equity in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Small Cap Equity 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 Small Cap. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Small Cap Equity has no effect on the direction of GlaxoSmithKline PLC i.e., GlaxoSmithKline PLC and Small Cap go up and down completely randomly.
Pair Corralation between GlaxoSmithKline PLC and Small Cap
Considering the 90-day investment horizon GlaxoSmithKline PLC is expected to generate 3.56 times less return on investment than Small Cap. In addition to that, GlaxoSmithKline PLC is 1.13 times more volatile than Small Cap Equity. It trades about 0.02 of its total potential returns per unit of risk. Small Cap Equity is currently generating about 0.06 per unit of volatility. If you would invest 1,601 in Small Cap Equity on August 31, 2024 and sell it today you would earn a total of 430.00 from holding Small Cap Equity or generate 26.86% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Significant |
| Accuracy | 99.73% |
| Values | Daily Returns |
GlaxoSmithKline PLC ADR vs. Small Cap Equity
Performance |
| Timeline |
| GlaxoSmithKline PLC ADR |
| Small Cap Equity |
GlaxoSmithKline PLC and Small Cap Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with GlaxoSmithKline PLC and Small Cap
The main advantage of trading using opposite GlaxoSmithKline PLC and Small Cap positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GlaxoSmithKline PLC position performs unexpectedly, Small Cap 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 Small Cap will offset losses from the drop in Small Cap'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 |
| Small Cap vs. Vanguard Small Cap Index | Small Cap vs. T Rowe Price | Small Cap vs. HUMANA INC | Small Cap vs. SCOR PK |
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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.
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