Correlation Between GlaxoSmithKline PLC and Magnolia Oil
Can any of the company-specific risk be diversified away by investing in both GlaxoSmithKline PLC and Magnolia Oil 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 Magnolia Oil 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 Magnolia Oil Gas, you can compare the effects of market volatilities on GlaxoSmithKline PLC and Magnolia Oil 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 Magnolia Oil. Check out your portfolio center. Please also check ongoing floating volatility patterns of GlaxoSmithKline PLC and Magnolia Oil.
Diversification Opportunities for GlaxoSmithKline PLC and Magnolia Oil
-0.79 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between GlaxoSmithKline and Magnolia is -0.79. Overlapping area represents the amount of risk that can be diversified away by holding GlaxoSmithKline PLC ADR and Magnolia Oil Gas in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Magnolia Oil Gas 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 Magnolia Oil. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Magnolia Oil Gas has no effect on the direction of GlaxoSmithKline PLC i.e., GlaxoSmithKline PLC and Magnolia Oil go up and down completely randomly.
Pair Corralation between GlaxoSmithKline PLC and Magnolia Oil
Considering the 90-day investment horizon GlaxoSmithKline PLC ADR is expected to under-perform the Magnolia Oil. But the stock apears to be less risky and, when comparing its historical volatility, GlaxoSmithKline PLC ADR is 1.44 times less risky than Magnolia Oil. The stock trades about -0.3 of its potential returns per unit of risk. The Magnolia Oil Gas is currently generating about 0.25 of returns per unit of risk over similar time horizon. If you would invest 2,545 in Magnolia Oil Gas on August 27, 2024 and sell it today you would earn a total of 274.00 from holding Magnolia Oil Gas or generate 10.77% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
GlaxoSmithKline PLC ADR vs. Magnolia Oil Gas
Performance |
| Timeline |
| GlaxoSmithKline PLC ADR |
| Magnolia Oil Gas |
GlaxoSmithKline PLC and Magnolia Oil Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with GlaxoSmithKline PLC and Magnolia Oil
The main advantage of trading using opposite GlaxoSmithKline PLC and Magnolia Oil positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GlaxoSmithKline PLC position performs unexpectedly, Magnolia Oil 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 Magnolia Oil will offset losses from the drop in Magnolia Oil'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 |
| Magnolia Oil vs. Devon Energy | Magnolia Oil vs. ConocoPhillips | Magnolia Oil vs. Occidental Petroleum | Magnolia Oil vs. Permian Resources |
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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.
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