Correlation Between GlaxoSmithKline PLC and MGP Ingredients
Can any of the company-specific risk be diversified away by investing in both GlaxoSmithKline PLC and MGP Ingredients 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 MGP Ingredients 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 MGP Ingredients, you can compare the effects of market volatilities on GlaxoSmithKline PLC and MGP Ingredients 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 MGP Ingredients. Check out your portfolio center. Please also check ongoing floating volatility patterns of GlaxoSmithKline PLC and MGP Ingredients.
Diversification Opportunities for GlaxoSmithKline PLC and MGP Ingredients
0.89 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between GlaxoSmithKline and MGP is 0.89. Overlapping area represents the amount of risk that can be diversified away by holding GlaxoSmithKline PLC ADR and MGP Ingredients in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on MGP Ingredients 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 MGP Ingredients. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of MGP Ingredients has no effect on the direction of GlaxoSmithKline PLC i.e., GlaxoSmithKline PLC and MGP Ingredients go up and down completely randomly.
Pair Corralation between GlaxoSmithKline PLC and MGP Ingredients
Considering the 90-day investment horizon GlaxoSmithKline PLC ADR is expected to generate 0.49 times more return on investment than MGP Ingredients. However, GlaxoSmithKline PLC ADR is 2.06 times less risky than MGP Ingredients. It trades about -0.12 of its potential returns per unit of risk. MGP Ingredients is currently generating about -0.1 per unit of risk. If you would invest 4,385 in GlaxoSmithKline PLC ADR on August 29, 2024 and sell it today you would lose (983.00) from holding GlaxoSmithKline PLC ADR or give up 22.42% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 97.66% |
| Values | Daily Returns |
GlaxoSmithKline PLC ADR vs. MGP Ingredients
Performance |
| Timeline |
| GlaxoSmithKline PLC ADR |
| MGP Ingredients |
GlaxoSmithKline PLC and MGP Ingredients Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with GlaxoSmithKline PLC and MGP Ingredients
The main advantage of trading using opposite GlaxoSmithKline PLC and MGP Ingredients positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GlaxoSmithKline PLC position performs unexpectedly, MGP Ingredients 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 MGP Ingredients will offset losses from the drop in MGP Ingredients' 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 |
| MGP Ingredients vs. WisdomTree Investments | MGP Ingredients vs. ETFS Coffee ETC | MGP Ingredients vs. IMAGIN MEDICAL INC | MGP Ingredients vs. Microbot Medical |
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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.
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