Correlation Between GlaxoSmithKline PLC and Knight Therapeutics
Can any of the company-specific risk be diversified away by investing in both GlaxoSmithKline PLC and Knight Therapeutics 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 Knight Therapeutics 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 Knight Therapeutics, you can compare the effects of market volatilities on GlaxoSmithKline PLC and Knight Therapeutics 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 Knight Therapeutics. Check out your portfolio center. Please also check ongoing floating volatility patterns of GlaxoSmithKline PLC and Knight Therapeutics.
Diversification Opportunities for GlaxoSmithKline PLC and Knight Therapeutics
0.69 | Correlation Coefficient |
Poor diversification
The 3 months correlation between GlaxoSmithKline and Knight is 0.69. Overlapping area represents the amount of risk that can be diversified away by holding GlaxoSmithKline PLC ADR and Knight Therapeutics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Knight Therapeutics 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 Knight Therapeutics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Knight Therapeutics has no effect on the direction of GlaxoSmithKline PLC i.e., GlaxoSmithKline PLC and Knight Therapeutics go up and down completely randomly.
Pair Corralation between GlaxoSmithKline PLC and Knight Therapeutics
Considering the 90-day investment horizon GlaxoSmithKline PLC ADR is expected to under-perform the Knight Therapeutics. But the stock apears to be less risky and, when comparing its historical volatility, GlaxoSmithKline PLC ADR is 1.16 times less risky than Knight Therapeutics. The stock trades about -0.12 of its potential returns per unit of risk. The Knight Therapeutics is currently generating about -0.06 of returns per unit of risk over similar time horizon. If you would invest 440.00 in Knight Therapeutics on August 25, 2024 and sell it today you would lose (67.00) from holding Knight Therapeutics or give up 15.23% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
GlaxoSmithKline PLC ADR vs. Knight Therapeutics
Performance |
| Timeline |
| GlaxoSmithKline PLC ADR |
| Knight Therapeutics |
GlaxoSmithKline PLC and Knight Therapeutics Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with GlaxoSmithKline PLC and Knight Therapeutics
The main advantage of trading using opposite GlaxoSmithKline PLC and Knight Therapeutics positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GlaxoSmithKline PLC position performs unexpectedly, Knight Therapeutics 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 Knight Therapeutics will offset losses from the drop in Knight Therapeutics' 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 |
| Knight Therapeutics vs. Rezolute | Knight Therapeutics vs. Tempest Therapeutics | Knight Therapeutics vs. Forte Biosciences | Knight Therapeutics vs. Dyadic International |
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 Funds Screener module to find actively-traded funds from around the world traded on over 30 global exchanges.
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