Correlation Between GlaxoSmithKline PLC and Arrow Managed
Can any of the company-specific risk be diversified away by investing in both GlaxoSmithKline PLC and Arrow Managed 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 Arrow Managed 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 Arrow Managed Futures, you can compare the effects of market volatilities on GlaxoSmithKline PLC and Arrow Managed 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 Arrow Managed. Check out your portfolio center. Please also check ongoing floating volatility patterns of GlaxoSmithKline PLC and Arrow Managed.
Diversification Opportunities for GlaxoSmithKline PLC and Arrow Managed
0.64 | Correlation Coefficient |
Poor diversification
The 3 months correlation between GlaxoSmithKline and Arrow is 0.64. Overlapping area represents the amount of risk that can be diversified away by holding GlaxoSmithKline PLC ADR and Arrow Managed Futures in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Arrow Managed Futures 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 Arrow Managed. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Arrow Managed Futures has no effect on the direction of GlaxoSmithKline PLC i.e., GlaxoSmithKline PLC and Arrow Managed go up and down completely randomly.
Pair Corralation between GlaxoSmithKline PLC and Arrow Managed
Considering the 90-day investment horizon GlaxoSmithKline PLC ADR is expected to under-perform the Arrow Managed. But the stock apears to be less risky and, when comparing its historical volatility, GlaxoSmithKline PLC ADR is 1.14 times less risky than Arrow Managed. The stock trades about -0.24 of its potential returns per unit of risk. The Arrow Managed Futures is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest 544.00 in Arrow Managed Futures on August 31, 2024 and sell it today you would earn a total of 14.00 from holding Arrow Managed Futures or generate 2.57% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
GlaxoSmithKline PLC ADR vs. Arrow Managed Futures
Performance |
| Timeline |
| GlaxoSmithKline PLC ADR |
| Arrow Managed Futures |
GlaxoSmithKline PLC and Arrow Managed Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with GlaxoSmithKline PLC and Arrow Managed
The main advantage of trading using opposite GlaxoSmithKline PLC and Arrow Managed positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GlaxoSmithKline PLC position performs unexpectedly, Arrow Managed 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 Arrow Managed will offset losses from the drop in Arrow Managed'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 |
| Arrow Managed vs. Aqr Managed Futures | Arrow Managed vs. Pimco Trends Managed | Arrow Managed vs. Pimco Trends Managed | Arrow Managed vs. American Beacon Ahl |
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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.
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