Correlation Between GlaxoSmithKline PLC and Leidos Holdings
Can any of the company-specific risk be diversified away by investing in both GlaxoSmithKline PLC and Leidos Holdings 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 Leidos Holdings 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 Leidos Holdings, you can compare the effects of market volatilities on GlaxoSmithKline PLC and Leidos Holdings 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 Leidos Holdings. Check out your portfolio center. Please also check ongoing floating volatility patterns of GlaxoSmithKline PLC and Leidos Holdings.
Diversification Opportunities for GlaxoSmithKline PLC and Leidos Holdings
-0.72 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between GlaxoSmithKline and Leidos is -0.72. Overlapping area represents the amount of risk that can be diversified away by holding GlaxoSmithKline PLC ADR and Leidos Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Leidos Holdings 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 Leidos Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Leidos Holdings has no effect on the direction of GlaxoSmithKline PLC i.e., GlaxoSmithKline PLC and Leidos Holdings go up and down completely randomly.
Pair Corralation between GlaxoSmithKline PLC and Leidos Holdings
Considering the 90-day investment horizon GlaxoSmithKline PLC is expected to generate 32.86 times less return on investment than Leidos Holdings. But when comparing it to its historical volatility, GlaxoSmithKline PLC ADR is 1.5 times less risky than Leidos Holdings. It trades about 0.01 of its potential returns per unit of risk. Leidos Holdings is currently generating about 0.14 of returns per unit of risk over similar time horizon. If you would invest 3,900 in Leidos Holdings on August 30, 2024 and sell it today you would earn a total of 5,670 from holding Leidos Holdings or generate 145.38% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 87.56% |
| Values | Daily Returns |
GlaxoSmithKline PLC ADR vs. Leidos Holdings
Performance |
| Timeline |
| GlaxoSmithKline PLC ADR |
| Leidos Holdings |
GlaxoSmithKline PLC and Leidos Holdings Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with GlaxoSmithKline PLC and Leidos Holdings
The main advantage of trading using opposite GlaxoSmithKline PLC and Leidos Holdings positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GlaxoSmithKline PLC position performs unexpectedly, Leidos Holdings 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 Leidos Holdings will offset losses from the drop in Leidos Holdings' 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 |
| Leidos Holdings vs. Spotify Technology SA | Leidos Holdings vs. Cognizant Technology Solutions | Leidos Holdings vs. Charter Communications | Leidos Holdings vs. Take Two Interactive Software |
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 Anywhere module to track or share privately all of your investments from the convenience of any device.
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