Correlation Between GlaxoSmithKline PLC and Neste Oyj
Can any of the company-specific risk be diversified away by investing in both GlaxoSmithKline PLC and Neste Oyj 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 Neste Oyj 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 Neste Oyj, you can compare the effects of market volatilities on GlaxoSmithKline PLC and Neste Oyj 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 Neste Oyj. Check out your portfolio center. Please also check ongoing floating volatility patterns of GlaxoSmithKline PLC and Neste Oyj.
Diversification Opportunities for GlaxoSmithKline PLC and Neste Oyj
0.76 | Correlation Coefficient |
Poor diversification
The 3 months correlation between GlaxoSmithKline and Neste is 0.76. Overlapping area represents the amount of risk that can be diversified away by holding GlaxoSmithKline PLC ADR and Neste Oyj in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Neste Oyj 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 Neste Oyj. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Neste Oyj has no effect on the direction of GlaxoSmithKline PLC i.e., GlaxoSmithKline PLC and Neste Oyj go up and down completely randomly.
Pair Corralation between GlaxoSmithKline PLC and Neste Oyj
Considering the 90-day investment horizon GlaxoSmithKline PLC ADR is expected to under-perform the Neste Oyj. But the stock apears to be less risky and, when comparing its historical volatility, GlaxoSmithKline PLC ADR is 1.88 times less risky than Neste Oyj. The stock trades about -0.26 of its potential returns per unit of risk. The Neste Oyj is currently generating about -0.07 of returns per unit of risk over similar time horizon. If you would invest 1,617 in Neste Oyj on August 25, 2024 and sell it today you would lose (176.00) from holding Neste Oyj or give up 10.88% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
GlaxoSmithKline PLC ADR vs. Neste Oyj
Performance |
| Timeline |
| GlaxoSmithKline PLC ADR |
| Neste Oyj |
GlaxoSmithKline PLC and Neste Oyj Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with GlaxoSmithKline PLC and Neste Oyj
The main advantage of trading using opposite GlaxoSmithKline PLC and Neste Oyj positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GlaxoSmithKline PLC position performs unexpectedly, Neste Oyj 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 Neste Oyj will offset losses from the drop in Neste Oyj'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 |
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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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