Correlation Between GlaxoSmithKline PLC and Wells Fargo
Can any of the company-specific risk be diversified away by investing in both GlaxoSmithKline PLC and Wells Fargo 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 Wells Fargo 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 Wells Fargo Short, you can compare the effects of market volatilities on GlaxoSmithKline PLC and Wells Fargo 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 Wells Fargo. Check out your portfolio center. Please also check ongoing floating volatility patterns of GlaxoSmithKline PLC and Wells Fargo.
Diversification Opportunities for GlaxoSmithKline PLC and Wells Fargo
0.19 | Correlation Coefficient |
Average diversification
The 3 months correlation between GlaxoSmithKline and Wells is 0.19. Overlapping area represents the amount of risk that can be diversified away by holding GlaxoSmithKline PLC ADR and Wells Fargo Short in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Wells Fargo Short 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 Wells Fargo. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Wells Fargo Short has no effect on the direction of GlaxoSmithKline PLC i.e., GlaxoSmithKline PLC and Wells Fargo go up and down completely randomly.
Pair Corralation between GlaxoSmithKline PLC and Wells Fargo
Considering the 90-day investment horizon GlaxoSmithKline PLC ADR is expected to under-perform the Wells Fargo. In addition to that, GlaxoSmithKline PLC is 11.5 times more volatile than Wells Fargo Short. It trades about -0.12 of its total potential returns per unit of risk. Wells Fargo Short is currently generating about 0.18 per unit of volatility. If you would invest 863.00 in Wells Fargo Short on August 26, 2024 and sell it today you would earn a total of 27.00 from holding Wells Fargo Short or generate 3.13% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
GlaxoSmithKline PLC ADR vs. Wells Fargo Short
Performance |
| Timeline |
| GlaxoSmithKline PLC ADR |
| Wells Fargo Short |
GlaxoSmithKline PLC and Wells Fargo Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with GlaxoSmithKline PLC and Wells Fargo
The main advantage of trading using opposite GlaxoSmithKline PLC and Wells Fargo positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GlaxoSmithKline PLC position performs unexpectedly, Wells Fargo 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 Wells Fargo will offset losses from the drop in Wells Fargo'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 |
| Wells Fargo vs. Wells Fargo Advantage | Wells Fargo vs. Wells Fargo Advantage | Wells Fargo vs. Wells Fargo Advantage | Wells Fargo vs. Wells Fargo Ultra |
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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.
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