Correlation Between GlaxoSmithKline PLC and Nikon Corp
Can any of the company-specific risk be diversified away by investing in both GlaxoSmithKline PLC and Nikon Corp 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 Nikon Corp 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 Nikon Corp, you can compare the effects of market volatilities on GlaxoSmithKline PLC and Nikon Corp 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 Nikon Corp. Check out your portfolio center. Please also check ongoing floating volatility patterns of GlaxoSmithKline PLC and Nikon Corp.
Diversification Opportunities for GlaxoSmithKline PLC and Nikon Corp
-0.8 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between GlaxoSmithKline and Nikon is -0.8. Overlapping area represents the amount of risk that can be diversified away by holding GlaxoSmithKline PLC ADR and Nikon Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nikon 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 Nikon Corp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nikon Corp has no effect on the direction of GlaxoSmithKline PLC i.e., GlaxoSmithKline PLC and Nikon Corp go up and down completely randomly.
Pair Corralation between GlaxoSmithKline PLC and Nikon Corp
Considering the 90-day investment horizon GlaxoSmithKline PLC is expected to generate 9.78 times less return on investment than Nikon Corp. But when comparing it to its historical volatility, GlaxoSmithKline PLC ADR is 1.86 times less risky than Nikon Corp. It trades about 0.01 of its potential returns per unit of risk. Nikon Corp is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest 905.00 in Nikon Corp on August 28, 2024 and sell it today you would earn a total of 276.00 from holding Nikon Corp or generate 30.5% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
GlaxoSmithKline PLC ADR vs. Nikon Corp
Performance |
| Timeline |
| GlaxoSmithKline PLC ADR |
| Nikon Corp |
GlaxoSmithKline PLC and Nikon Corp Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with GlaxoSmithKline PLC and Nikon Corp
The main advantage of trading using opposite GlaxoSmithKline PLC and Nikon Corp positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GlaxoSmithKline PLC position performs unexpectedly, Nikon Corp 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 Nikon Corp will offset losses from the drop in Nikon Corp'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 |
| Nikon Corp vs. Yamaha Corp DRC | Nikon Corp vs. Planet Fitness | Nikon Corp vs. Plby Group | Nikon Corp vs. Shimano Inc ADR |
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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.
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