Correlation Between GlaxoSmithKline PLC and Lopez Holdings
Can any of the company-specific risk be diversified away by investing in both GlaxoSmithKline PLC and Lopez 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 Lopez 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 Lopez Holdings Corp, you can compare the effects of market volatilities on GlaxoSmithKline PLC and Lopez 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 Lopez Holdings. Check out your portfolio center. Please also check ongoing floating volatility patterns of GlaxoSmithKline PLC and Lopez Holdings.
Diversification Opportunities for GlaxoSmithKline PLC and Lopez Holdings
0.05 | Correlation Coefficient |
Significant diversification
The 3 months correlation between GlaxoSmithKline and Lopez is 0.05. Overlapping area represents the amount of risk that can be diversified away by holding GlaxoSmithKline PLC ADR and Lopez Holdings Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lopez Holdings Corp 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 Lopez Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lopez Holdings Corp has no effect on the direction of GlaxoSmithKline PLC i.e., GlaxoSmithKline PLC and Lopez Holdings go up and down completely randomly.
Pair Corralation between GlaxoSmithKline PLC and Lopez Holdings
Considering the 90-day investment horizon GlaxoSmithKline PLC ADR is expected to generate 0.44 times more return on investment than Lopez Holdings. However, GlaxoSmithKline PLC ADR is 2.29 times less risky than Lopez Holdings. It trades about 0.02 of its potential returns per unit of risk. Lopez Holdings Corp is currently generating about -0.01 per unit of risk. If you would invest 3,273 in GlaxoSmithKline PLC ADR on August 31, 2024 and sell it today you would earn a total of 140.00 from holding GlaxoSmithKline PLC ADR or generate 4.28% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 86.36% |
| Values | Daily Returns |
GlaxoSmithKline PLC ADR vs. Lopez Holdings Corp
Performance |
| Timeline |
| GlaxoSmithKline PLC ADR |
| Lopez Holdings Corp |
GlaxoSmithKline PLC and Lopez Holdings Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with GlaxoSmithKline PLC and Lopez Holdings
The main advantage of trading using opposite GlaxoSmithKline PLC and Lopez Holdings positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GlaxoSmithKline PLC position performs unexpectedly, Lopez 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 Lopez Holdings will offset losses from the drop in Lopez 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 |
| Lopez Holdings vs. Jollibee Foods Corp | Lopez Holdings vs. Allhome Corp | Lopez Holdings vs. Cebu Air Preferred | Lopez Holdings vs. Premiere Entertainment |
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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.
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