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
-0.64 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between GlaxoSmithKline and Small is -0.64. 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 ADR is expected to under-perform the Small Cap. But the stock apears to be less risky and, when comparing its historical volatility, GlaxoSmithKline PLC ADR is 1.18 times less risky than Small Cap. The stock trades about -0.31 of its potential returns per unit of risk. The Small Cap Equity is currently generating about 0.18 of returns per unit of risk over similar time horizon. If you would invest 3,362 in Small Cap Equity on August 26, 2024 and sell it today you would earn a total of 213.00 from holding Small Cap Equity or generate 6.34% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 100.0% |
| 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. Large Cap Growth | Small Cap vs. Lazard International Strategic | Small Cap vs. Equity Income Fund | Small Cap vs. Large Cap E |
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 Search module to search for actively traded equities including funds and ETFs from over 30 global markets.
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