Correlation Between GlaxoSmithKline PLC and Otto Energy
Can any of the company-specific risk be diversified away by investing in both GlaxoSmithKline PLC and Otto Energy 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 Otto Energy 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 Otto Energy, you can compare the effects of market volatilities on GlaxoSmithKline PLC and Otto Energy 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 Otto Energy. Check out your portfolio center. Please also check ongoing floating volatility patterns of GlaxoSmithKline PLC and Otto Energy.
Diversification Opportunities for GlaxoSmithKline PLC and Otto Energy
0.22 | Correlation Coefficient |
Modest diversification
The 3 months correlation between GlaxoSmithKline and Otto is 0.22. Overlapping area represents the amount of risk that can be diversified away by holding GlaxoSmithKline PLC ADR and Otto Energy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Otto Energy 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 Otto Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Otto Energy has no effect on the direction of GlaxoSmithKline PLC i.e., GlaxoSmithKline PLC and Otto Energy go up and down completely randomly.
Pair Corralation between GlaxoSmithKline PLC and Otto Energy
Considering the 90-day investment horizon GlaxoSmithKline PLC ADR is expected to generate 0.17 times more return on investment than Otto Energy. However, GlaxoSmithKline PLC ADR is 5.99 times less risky than Otto Energy. It trades about -0.23 of its potential returns per unit of risk. Otto Energy is currently generating about -0.06 per unit of risk. If you would invest 3,659 in GlaxoSmithKline PLC ADR on August 31, 2024 and sell it today you would lose (226.00) from holding GlaxoSmithKline PLC ADR or give up 6.18% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 95.65% |
| Values | Daily Returns |
GlaxoSmithKline PLC ADR vs. Otto Energy
Performance |
| Timeline |
| GlaxoSmithKline PLC ADR |
| Otto Energy |
GlaxoSmithKline PLC and Otto Energy Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with GlaxoSmithKline PLC and Otto Energy
The main advantage of trading using opposite GlaxoSmithKline PLC and Otto Energy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GlaxoSmithKline PLC position performs unexpectedly, Otto Energy 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 Otto Energy will offset losses from the drop in Otto Energy'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 |
| Otto Energy vs. EVE Health Group | Otto Energy vs. Dexus Convenience Retail | Otto Energy vs. Truscott Mining Corp | Otto Energy vs. Perseus Mining |
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 Global Markets Map module to get a quick overview of global market snapshot using zoomable world map. Drill down to check world indexes.
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