Correlation Between GlaxoSmithKline PLC and Tencent Holdings
Can any of the company-specific risk be diversified away by investing in both GlaxoSmithKline PLC and Tencent Holdings 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 Tencent Holdings 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 Tencent Holdings Ltd, you can compare the effects of market volatilities on GlaxoSmithKline PLC and Tencent Holdings 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 Tencent Holdings. Check out your portfolio center. Please also check ongoing floating volatility patterns of GlaxoSmithKline PLC and Tencent Holdings.
Diversification Opportunities for GlaxoSmithKline PLC and Tencent Holdings
-0.53 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between GlaxoSmithKline and Tencent is -0.53. Overlapping area represents the amount of risk that can be diversified away by holding GlaxoSmithKline PLC ADR and Tencent Holdings Ltd in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Tencent Holdings 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 Tencent Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Tencent Holdings has no effect on the direction of GlaxoSmithKline PLC i.e., GlaxoSmithKline PLC and Tencent Holdings go up and down completely randomly.
Pair Corralation between GlaxoSmithKline PLC and Tencent Holdings
Considering the 90-day investment horizon GlaxoSmithKline PLC is expected to generate 4.04 times less return on investment than Tencent Holdings. But when comparing it to its historical volatility, GlaxoSmithKline PLC ADR is 1.7 times less risky than Tencent Holdings. It trades about 0.01 of its potential returns per unit of risk. Tencent Holdings Ltd is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest 3,904 in Tencent Holdings Ltd on September 1, 2024 and sell it today you would earn a total of 896.00 from holding Tencent Holdings Ltd or generate 22.95% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 97.64% |
| Values | Daily Returns |
GlaxoSmithKline PLC ADR vs. Tencent Holdings Ltd
Performance |
| Timeline |
| GlaxoSmithKline PLC ADR |
| Tencent Holdings |
GlaxoSmithKline PLC and Tencent Holdings Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with GlaxoSmithKline PLC and Tencent Holdings
The main advantage of trading using opposite GlaxoSmithKline PLC and Tencent Holdings positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GlaxoSmithKline PLC position performs unexpectedly, Tencent Holdings 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 Tencent Holdings will offset losses from the drop in Tencent Holdings' 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 |
| Tencent Holdings vs. Mitsubishi Gas Chemical | Tencent Holdings vs. SHIN ETSU CHEMICAL | Tencent Holdings vs. PTT Global Chemical | Tencent Holdings vs. Insteel Industries |
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 Financial Widgets module to easily integrated Macroaxis content with over 30 different plug-and-play financial widgets.
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