Correlation Between GlaxoSmithKline PLC and Japan Medical
Can any of the company-specific risk be diversified away by investing in both GlaxoSmithKline PLC and Japan Medical 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 Japan Medical 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 Japan Medical Dynamic, you can compare the effects of market volatilities on GlaxoSmithKline PLC and Japan Medical 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 Japan Medical. Check out your portfolio center. Please also check ongoing floating volatility patterns of GlaxoSmithKline PLC and Japan Medical.
Diversification Opportunities for GlaxoSmithKline PLC and Japan Medical
0.92 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between GlaxoSmithKline and Japan is 0.92. Overlapping area represents the amount of risk that can be diversified away by holding GlaxoSmithKline PLC ADR and Japan Medical Dynamic in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Japan Medical Dynamic 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 Japan Medical. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Japan Medical Dynamic has no effect on the direction of GlaxoSmithKline PLC i.e., GlaxoSmithKline PLC and Japan Medical go up and down completely randomly.
Pair Corralation between GlaxoSmithKline PLC and Japan Medical
Considering the 90-day investment horizon GlaxoSmithKline PLC ADR is expected to under-perform the Japan Medical. But the stock apears to be less risky and, when comparing its historical volatility, GlaxoSmithKline PLC ADR is 1.14 times less risky than Japan Medical. The stock trades about -0.3 of its potential returns per unit of risk. The Japan Medical Dynamic is currently generating about -0.21 of returns per unit of risk over similar time horizon. If you would invest 394.00 in Japan Medical Dynamic on August 29, 2024 and sell it today you would lose (28.00) from holding Japan Medical Dynamic or give up 7.11% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 95.65% |
| Values | Daily Returns |
GlaxoSmithKline PLC ADR vs. Japan Medical Dynamic
Performance |
| Timeline |
| GlaxoSmithKline PLC ADR |
| Japan Medical Dynamic |
GlaxoSmithKline PLC and Japan Medical Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with GlaxoSmithKline PLC and Japan Medical
The main advantage of trading using opposite GlaxoSmithKline PLC and Japan Medical positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GlaxoSmithKline PLC position performs unexpectedly, Japan Medical 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 Japan Medical will offset losses from the drop in Japan Medical'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 |
| Japan Medical vs. IMAGIN MEDICAL INC | Japan Medical vs. COSTCO WHOLESALE CDR | Japan Medical vs. ONWARD MEDICAL BV | Japan Medical vs. FAST RETAIL ADR |
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 Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.
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