Correlation Between GlaxoSmithKline PLC and Norsk Hydro
Can any of the company-specific risk be diversified away by investing in both GlaxoSmithKline PLC and Norsk Hydro 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 Norsk Hydro 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 Norsk Hydro ASA, you can compare the effects of market volatilities on GlaxoSmithKline PLC and Norsk Hydro 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 Norsk Hydro. Check out your portfolio center. Please also check ongoing floating volatility patterns of GlaxoSmithKline PLC and Norsk Hydro.
Diversification Opportunities for GlaxoSmithKline PLC and Norsk Hydro
-0.67 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between GlaxoSmithKline and Norsk is -0.67. Overlapping area represents the amount of risk that can be diversified away by holding GlaxoSmithKline PLC ADR and Norsk Hydro ASA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Norsk Hydro ASA 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 Norsk Hydro. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Norsk Hydro ASA has no effect on the direction of GlaxoSmithKline PLC i.e., GlaxoSmithKline PLC and Norsk Hydro go up and down completely randomly.
Pair Corralation between GlaxoSmithKline PLC and Norsk Hydro
Considering the 90-day investment horizon GlaxoSmithKline PLC is expected to generate 40.3 times less return on investment than Norsk Hydro. But when comparing it to its historical volatility, GlaxoSmithKline PLC ADR is 2.43 times less risky than Norsk Hydro. It trades about 0.0 of its potential returns per unit of risk. Norsk Hydro ASA is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest 605.00 in Norsk Hydro ASA on August 24, 2024 and sell it today you would earn a total of 62.00 from holding Norsk Hydro ASA or generate 10.25% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 99.6% |
| Values | Daily Returns |
GlaxoSmithKline PLC ADR vs. Norsk Hydro ASA
Performance |
| Timeline |
| GlaxoSmithKline PLC ADR |
| Norsk Hydro ASA |
GlaxoSmithKline PLC and Norsk Hydro Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with GlaxoSmithKline PLC and Norsk Hydro
The main advantage of trading using opposite GlaxoSmithKline PLC and Norsk Hydro positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GlaxoSmithKline PLC position performs unexpectedly, Norsk Hydro 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 Norsk Hydro will offset losses from the drop in Norsk Hydro'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 |
| Norsk Hydro vs. Kaiser Aluminum | Norsk Hydro vs. Century Aluminum | Norsk Hydro vs. Constellium Nv | Norsk Hydro vs. Alcoa Corp |
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 Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.
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