Correlation Between GlaxoSmithKline PLC and NewHold Investment
Can any of the company-specific risk be diversified away by investing in both GlaxoSmithKline PLC and NewHold Investment 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 NewHold Investment 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 NewHold Investment Corp, you can compare the effects of market volatilities on GlaxoSmithKline PLC and NewHold Investment 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 NewHold Investment. Check out your portfolio center. Please also check ongoing floating volatility patterns of GlaxoSmithKline PLC and NewHold Investment.
Diversification Opportunities for GlaxoSmithKline PLC and NewHold Investment
-0.68 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between GlaxoSmithKline and NewHold is -0.68. Overlapping area represents the amount of risk that can be diversified away by holding GlaxoSmithKline PLC ADR and NewHold Investment Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NewHold Investment Corp 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 NewHold Investment. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of NewHold Investment Corp has no effect on the direction of GlaxoSmithKline PLC i.e., GlaxoSmithKline PLC and NewHold Investment go up and down completely randomly.
Pair Corralation between GlaxoSmithKline PLC and NewHold Investment
Considering the 90-day investment horizon GlaxoSmithKline PLC is expected to generate 1619.54 times less return on investment than NewHold Investment. But when comparing it to its historical volatility, GlaxoSmithKline PLC ADR is 122.36 times less risky than NewHold Investment. It trades about 0.01 of its potential returns per unit of risk. NewHold Investment Corp is currently generating about 0.16 of returns per unit of risk over similar time horizon. If you would invest 4.50 in NewHold Investment Corp on August 26, 2024 and sell it today you would lose (3.20) from holding NewHold Investment Corp or give up 71.11% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 8.25% |
| Values | Daily Returns |
GlaxoSmithKline PLC ADR vs. NewHold Investment Corp
Performance |
| Timeline |
| GlaxoSmithKline PLC ADR |
| NewHold Investment Corp |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Very Weak
GlaxoSmithKline PLC and NewHold Investment Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with GlaxoSmithKline PLC and NewHold Investment
The main advantage of trading using opposite GlaxoSmithKline PLC and NewHold Investment positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GlaxoSmithKline PLC position performs unexpectedly, NewHold Investment 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 NewHold Investment will offset losses from the drop in NewHold Investment'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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