Correlation Between GlaxoSmithKline PLC and Mercedes Benz
Can any of the company-specific risk be diversified away by investing in both GlaxoSmithKline PLC and Mercedes Benz 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 Mercedes Benz 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 Mercedes Benz Group AG, you can compare the effects of market volatilities on GlaxoSmithKline PLC and Mercedes Benz 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 Mercedes Benz. Check out your portfolio center. Please also check ongoing floating volatility patterns of GlaxoSmithKline PLC and Mercedes Benz.
Diversification Opportunities for GlaxoSmithKline PLC and Mercedes Benz
0.84 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between GlaxoSmithKline and Mercedes is 0.84. Overlapping area represents the amount of risk that can be diversified away by holding GlaxoSmithKline PLC ADR and Mercedes Benz Group AG in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Mercedes Benz Group 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 Mercedes Benz. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Mercedes Benz Group has no effect on the direction of GlaxoSmithKline PLC i.e., GlaxoSmithKline PLC and Mercedes Benz go up and down completely randomly.
Pair Corralation between GlaxoSmithKline PLC and Mercedes Benz
Considering the 90-day investment horizon GlaxoSmithKline PLC ADR is expected to generate 0.61 times more return on investment than Mercedes Benz. However, GlaxoSmithKline PLC ADR is 1.64 times less risky than Mercedes Benz. It trades about -0.3 of its potential returns per unit of risk. Mercedes Benz Group AG is currently generating about -0.23 per unit of risk. If you would invest 3,745 in GlaxoSmithKline PLC ADR on August 28, 2024 and sell it today you would lose (330.00) from holding GlaxoSmithKline PLC ADR or give up 8.81% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
GlaxoSmithKline PLC ADR vs. Mercedes Benz Group AG
Performance |
| Timeline |
| GlaxoSmithKline PLC ADR |
| Mercedes Benz Group |
GlaxoSmithKline PLC and Mercedes Benz Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with GlaxoSmithKline PLC and Mercedes Benz
The main advantage of trading using opposite GlaxoSmithKline PLC and Mercedes Benz positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GlaxoSmithKline PLC position performs unexpectedly, Mercedes Benz 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 Mercedes Benz will offset losses from the drop in Mercedes Benz'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 |
| Mercedes Benz vs. Bayerische Motoren Werke | Mercedes Benz vs. Porsche Automobile Holding | Mercedes Benz vs. Volkswagen AG 110 | Mercedes Benz vs. Mercedes Benz Group AG |
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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.
Other Complementary Tools
| Performance Analysis Check effects of mean-variance optimization against your current asset allocation | |
| Volatility Analysis Get historical volatility and risk analysis based on latest market data | |
| Premium Stories Follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope | |
| Price Transformation Use Price Transformation models to analyze the depth of different equity instruments across global markets | |
| Portfolio Dashboard Portfolio dashboard that provides centralized access to all your investments |