Correlation Between GlaxoSmithKline PLC and Nexam Chemical
Can any of the company-specific risk be diversified away by investing in both GlaxoSmithKline PLC and Nexam Chemical 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 Nexam Chemical 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 Nexam Chemical Holding, you can compare the effects of market volatilities on GlaxoSmithKline PLC and Nexam Chemical 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 Nexam Chemical. Check out your portfolio center. Please also check ongoing floating volatility patterns of GlaxoSmithKline PLC and Nexam Chemical.
Diversification Opportunities for GlaxoSmithKline PLC and Nexam Chemical
0.83 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between GlaxoSmithKline and Nexam is 0.83. Overlapping area represents the amount of risk that can be diversified away by holding GlaxoSmithKline PLC ADR and Nexam Chemical Holding in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nexam Chemical Holding 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 Nexam Chemical. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nexam Chemical Holding has no effect on the direction of GlaxoSmithKline PLC i.e., GlaxoSmithKline PLC and Nexam Chemical go up and down completely randomly.
Pair Corralation between GlaxoSmithKline PLC and Nexam Chemical
Considering the 90-day investment horizon GlaxoSmithKline PLC ADR is expected to under-perform the Nexam Chemical. But the stock apears to be less risky and, when comparing its historical volatility, GlaxoSmithKline PLC ADR is 1.75 times less risky than Nexam Chemical. The stock trades about -0.27 of its potential returns per unit of risk. The Nexam Chemical Holding is currently generating about -0.14 of returns per unit of risk over similar time horizon. If you would invest 420.00 in Nexam Chemical Holding on August 29, 2024 and sell it today you would lose (33.00) from holding Nexam Chemical Holding or give up 7.86% 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. Nexam Chemical Holding
Performance |
| Timeline |
| GlaxoSmithKline PLC ADR |
| Nexam Chemical Holding |
GlaxoSmithKline PLC and Nexam Chemical Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with GlaxoSmithKline PLC and Nexam Chemical
The main advantage of trading using opposite GlaxoSmithKline PLC and Nexam Chemical positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GlaxoSmithKline PLC position performs unexpectedly, Nexam Chemical 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 Nexam Chemical will offset losses from the drop in Nexam Chemical'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 |
| Nexam Chemical vs. Bjorn Borg AB | Nexam Chemical vs. Diadrom Holding AB | Nexam Chemical vs. Anoto Group AB | Nexam Chemical vs. Cloetta AB |
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 Crypto Correlations module to use cryptocurrency correlation module to diversify your cryptocurrency portfolio across multiple coins.
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