Correlation Between GlaxoSmithKline PLC and Prudential Short
Can any of the company-specific risk be diversified away by investing in both GlaxoSmithKline PLC and Prudential Short 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 Prudential Short 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 Prudential Short Duration, you can compare the effects of market volatilities on GlaxoSmithKline PLC and Prudential Short 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 Prudential Short. Check out your portfolio center. Please also check ongoing floating volatility patterns of GlaxoSmithKline PLC and Prudential Short.
Diversification Opportunities for GlaxoSmithKline PLC and Prudential Short
-0.6 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between GlaxoSmithKline and Prudential is -0.6. Overlapping area represents the amount of risk that can be diversified away by holding GlaxoSmithKline PLC ADR and Prudential Short Duration in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Prudential Short Duration 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 Prudential Short. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Prudential Short Duration has no effect on the direction of GlaxoSmithKline PLC i.e., GlaxoSmithKline PLC and Prudential Short go up and down completely randomly.
Pair Corralation between GlaxoSmithKline PLC and Prudential Short
Considering the 90-day investment horizon GlaxoSmithKline PLC ADR is expected to under-perform the Prudential Short. In addition to that, GlaxoSmithKline PLC is 10.76 times more volatile than Prudential Short Duration. It trades about -0.26 of its total potential returns per unit of risk. Prudential Short Duration is currently generating about -0.04 per unit of volatility. If you would invest 845.00 in Prudential Short Duration on August 25, 2024 and sell it today you would lose (2.00) from holding Prudential Short Duration or give up 0.24% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
GlaxoSmithKline PLC ADR vs. Prudential Short Duration
Performance |
| Timeline |
| GlaxoSmithKline PLC ADR |
| Prudential Short Duration |
GlaxoSmithKline PLC and Prudential Short Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with GlaxoSmithKline PLC and Prudential Short
The main advantage of trading using opposite GlaxoSmithKline PLC and Prudential Short positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GlaxoSmithKline PLC position performs unexpectedly, Prudential Short 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 Prudential Short will offset losses from the drop in Prudential Short'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 |
| Prudential Short vs. Jennison Natural Resources | Prudential Short vs. Dreyfus Natural Resources | Prudential Short vs. Oil Gas Ultrasector | Prudential Short vs. Short Oil Gas |
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 Portfolio Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.
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