Correlation Between GlaxoSmithKline PLC and Highlight Communications
Can any of the company-specific risk be diversified away by investing in both GlaxoSmithKline PLC and Highlight Communications 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 Highlight Communications 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 Highlight Communications AG, you can compare the effects of market volatilities on GlaxoSmithKline PLC and Highlight Communications 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 Highlight Communications. Check out your portfolio center. Please also check ongoing floating volatility patterns of GlaxoSmithKline PLC and Highlight Communications.
Diversification Opportunities for GlaxoSmithKline PLC and Highlight Communications
0.75 | Correlation Coefficient |
Poor diversification
The 3 months correlation between GlaxoSmithKline and Highlight is 0.75. Overlapping area represents the amount of risk that can be diversified away by holding GlaxoSmithKline PLC ADR and Highlight Communications AG in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Highlight Communications 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 Highlight Communications. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Highlight Communications has no effect on the direction of GlaxoSmithKline PLC i.e., GlaxoSmithKline PLC and Highlight Communications go up and down completely randomly.
Pair Corralation between GlaxoSmithKline PLC and Highlight Communications
Considering the 90-day investment horizon GlaxoSmithKline PLC ADR is expected to under-perform the Highlight Communications. But the stock apears to be less risky and, when comparing its historical volatility, GlaxoSmithKline PLC ADR is 1.78 times less risky than Highlight Communications. The stock trades about -0.3 of its potential returns per unit of risk. The Highlight Communications AG is currently generating about 0.19 of returns per unit of risk over similar time horizon. If you would invest 98.00 in Highlight Communications AG on August 28, 2024 and sell it today you would earn a total of 10.00 from holding Highlight Communications AG or generate 10.2% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
GlaxoSmithKline PLC ADR vs. Highlight Communications AG
Performance |
| Timeline |
| GlaxoSmithKline PLC ADR |
| Highlight Communications |
GlaxoSmithKline PLC and Highlight Communications Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with GlaxoSmithKline PLC and Highlight Communications
The main advantage of trading using opposite GlaxoSmithKline PLC and Highlight Communications positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GlaxoSmithKline PLC position performs unexpectedly, Highlight Communications 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 Highlight Communications will offset losses from the drop in Highlight Communications' 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 |
| Highlight Communications vs. The Walt Disney | Highlight Communications vs. Superior Plus Corp | Highlight Communications vs. NMI Holdings | Highlight Communications vs. Origin Agritech |
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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.
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