Correlation Between GlaxoSmithKline PLC and Hitachi Construction
Can any of the company-specific risk be diversified away by investing in both GlaxoSmithKline PLC and Hitachi Construction 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 Hitachi Construction 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 Hitachi Construction Machinery, you can compare the effects of market volatilities on GlaxoSmithKline PLC and Hitachi Construction 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 Hitachi Construction. Check out your portfolio center. Please also check ongoing floating volatility patterns of GlaxoSmithKline PLC and Hitachi Construction.
Diversification Opportunities for GlaxoSmithKline PLC and Hitachi Construction
0.68 | Correlation Coefficient |
Poor diversification
The 3 months correlation between GlaxoSmithKline and Hitachi is 0.68. Overlapping area represents the amount of risk that can be diversified away by holding GlaxoSmithKline PLC ADR and Hitachi Construction Machinery in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hitachi Construction 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 Hitachi Construction. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hitachi Construction has no effect on the direction of GlaxoSmithKline PLC i.e., GlaxoSmithKline PLC and Hitachi Construction go up and down completely randomly.
Pair Corralation between GlaxoSmithKline PLC and Hitachi Construction
Considering the 90-day investment horizon GlaxoSmithKline PLC is expected to generate 4.46 times less return on investment than Hitachi Construction. But when comparing it to its historical volatility, GlaxoSmithKline PLC ADR is 1.79 times less risky than Hitachi Construction. It trades about 0.01 of its potential returns per unit of risk. Hitachi Construction Machinery is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest 4,090 in Hitachi Construction Machinery on August 28, 2024 and sell it today you would earn a total of 240.00 from holding Hitachi Construction Machinery or generate 5.87% 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. Hitachi Construction Machinery
Performance |
| Timeline |
| GlaxoSmithKline PLC ADR |
| Hitachi Construction |
GlaxoSmithKline PLC and Hitachi Construction Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with GlaxoSmithKline PLC and Hitachi Construction
The main advantage of trading using opposite GlaxoSmithKline PLC and Hitachi Construction positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GlaxoSmithKline PLC position performs unexpectedly, Hitachi Construction 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 Hitachi Construction will offset losses from the drop in Hitachi Construction'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 |
| Hitachi Construction vs. Lion Electric Corp | Hitachi Construction vs. Nikola Corp | Hitachi Construction vs. Buhler Industries | Hitachi Construction vs. Toyota Industries |
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 Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.
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