Correlation Between GlaxoSmithKline PLC and Lixte Biotechnology
Can any of the company-specific risk be diversified away by investing in both GlaxoSmithKline PLC and Lixte Biotechnology 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 Lixte Biotechnology 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 Lixte Biotechnology Holdings, you can compare the effects of market volatilities on GlaxoSmithKline PLC and Lixte Biotechnology 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 Lixte Biotechnology. Check out your portfolio center. Please also check ongoing floating volatility patterns of GlaxoSmithKline PLC and Lixte Biotechnology.
Diversification Opportunities for GlaxoSmithKline PLC and Lixte Biotechnology
0.56 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between GlaxoSmithKline and Lixte is 0.56. Overlapping area represents the amount of risk that can be diversified away by holding GlaxoSmithKline PLC ADR and Lixte Biotechnology Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lixte Biotechnology 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 Lixte Biotechnology. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lixte Biotechnology has no effect on the direction of GlaxoSmithKline PLC i.e., GlaxoSmithKline PLC and Lixte Biotechnology go up and down completely randomly.
Pair Corralation between GlaxoSmithKline PLC and Lixte Biotechnology
Considering the 90-day investment horizon GlaxoSmithKline PLC is expected to generate 53.31 times less return on investment than Lixte Biotechnology. But when comparing it to its historical volatility, GlaxoSmithKline PLC ADR is 12.91 times less risky than Lixte Biotechnology. It trades about 0.02 of its potential returns per unit of risk. Lixte Biotechnology Holdings is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest 7.70 in Lixte Biotechnology Holdings on August 31, 2024 and sell it today you would lose (4.92) from holding Lixte Biotechnology Holdings or give up 63.9% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
GlaxoSmithKline PLC ADR vs. Lixte Biotechnology Holdings
Performance |
| Timeline |
| GlaxoSmithKline PLC ADR |
| Lixte Biotechnology |
GlaxoSmithKline PLC and Lixte Biotechnology Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with GlaxoSmithKline PLC and Lixte Biotechnology
The main advantage of trading using opposite GlaxoSmithKline PLC and Lixte Biotechnology positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GlaxoSmithKline PLC position performs unexpectedly, Lixte Biotechnology 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 Lixte Biotechnology will offset losses from the drop in Lixte Biotechnology'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 |
| Lixte Biotechnology vs. Reviva Pharmaceuticals Holdings | Lixte Biotechnology vs. CannBioRx Life Sciences |
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 Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.
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