Correlation Between GlaxoSmithKline PLC and Hyundai
Can any of the company-specific risk be diversified away by investing in both GlaxoSmithKline PLC and Hyundai 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 Hyundai 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 Hyundai Motor, you can compare the effects of market volatilities on GlaxoSmithKline PLC and Hyundai 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 Hyundai. Check out your portfolio center. Please also check ongoing floating volatility patterns of GlaxoSmithKline PLC and Hyundai.
Diversification Opportunities for GlaxoSmithKline PLC and Hyundai
0.66 | Correlation Coefficient |
Poor diversification
The 3 months correlation between GlaxoSmithKline and Hyundai is 0.66. Overlapping area represents the amount of risk that can be diversified away by holding GlaxoSmithKline PLC ADR and Hyundai Motor in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hyundai Motor 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 Hyundai. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hyundai Motor has no effect on the direction of GlaxoSmithKline PLC i.e., GlaxoSmithKline PLC and Hyundai go up and down completely randomly.
Pair Corralation between GlaxoSmithKline PLC and Hyundai
Considering the 90-day investment horizon GlaxoSmithKline PLC is expected to generate 10.55 times less return on investment than Hyundai. But when comparing it to its historical volatility, GlaxoSmithKline PLC ADR is 1.69 times less risky than Hyundai. It trades about 0.01 of its potential returns per unit of risk. Hyundai Motor is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest 2,573 in Hyundai Motor on August 26, 2024 and sell it today you would earn a total of 2,707 from holding Hyundai Motor or generate 105.21% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 98.22% |
| Values | Daily Returns |
GlaxoSmithKline PLC ADR vs. Hyundai Motor
Performance |
| Timeline |
| GlaxoSmithKline PLC ADR |
| Hyundai Motor |
GlaxoSmithKline PLC and Hyundai Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with GlaxoSmithKline PLC and Hyundai
The main advantage of trading using opposite GlaxoSmithKline PLC and Hyundai positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GlaxoSmithKline PLC position performs unexpectedly, Hyundai 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 Hyundai will offset losses from the drop in Hyundai'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 |
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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 ETFs module to find actively traded Exchange Traded Funds (ETF) from around the world.
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