Correlation Between GlaxoSmithKline PLC and Heritage Insurance
Can any of the company-specific risk be diversified away by investing in both GlaxoSmithKline PLC and Heritage Insurance 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 Heritage Insurance 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 Heritage Insurance Hldgs, you can compare the effects of market volatilities on GlaxoSmithKline PLC and Heritage Insurance 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 Heritage Insurance. Check out your portfolio center. Please also check ongoing floating volatility patterns of GlaxoSmithKline PLC and Heritage Insurance.
Diversification Opportunities for GlaxoSmithKline PLC and Heritage Insurance
0.67 | Correlation Coefficient |
Poor diversification
The 3 months correlation between GlaxoSmithKline and Heritage is 0.67. Overlapping area represents the amount of risk that can be diversified away by holding GlaxoSmithKline PLC ADR and Heritage Insurance Hldgs in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Heritage Insurance Hldgs 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 Heritage Insurance. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Heritage Insurance Hldgs has no effect on the direction of GlaxoSmithKline PLC i.e., GlaxoSmithKline PLC and Heritage Insurance go up and down completely randomly.
Pair Corralation between GlaxoSmithKline PLC and Heritage Insurance
Considering the 90-day investment horizon GlaxoSmithKline PLC ADR is expected to under-perform the Heritage Insurance. But the stock apears to be less risky and, when comparing its historical volatility, GlaxoSmithKline PLC ADR is 2.3 times less risky than Heritage Insurance. The stock trades about -0.23 of its potential returns per unit of risk. The Heritage Insurance Hldgs is currently generating about 0.31 of returns per unit of risk over similar time horizon. If you would invest 1,035 in Heritage Insurance Hldgs on September 1, 2024 and sell it today you would earn a total of 208.00 from holding Heritage Insurance Hldgs or generate 20.1% 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. Heritage Insurance Hldgs
Performance |
| Timeline |
| GlaxoSmithKline PLC ADR |
| Heritage Insurance Hldgs |
GlaxoSmithKline PLC and Heritage Insurance Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with GlaxoSmithKline PLC and Heritage Insurance
The main advantage of trading using opposite GlaxoSmithKline PLC and Heritage Insurance positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GlaxoSmithKline PLC position performs unexpectedly, Heritage Insurance 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 Heritage Insurance will offset losses from the drop in Heritage Insurance'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 |
| Heritage Insurance vs. Universal Insurance Holdings | Heritage Insurance vs. Donegal Group B | Heritage Insurance vs. Horace Mann Educators | Heritage Insurance vs. NI Holdings |
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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.
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