Correlation Between GlaxoSmithKline PLC and Pfizer
Can any of the company-specific risk be diversified away by investing in both GlaxoSmithKline PLC and Pfizer 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 Pfizer 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 Pfizer Inc, you can compare the effects of market volatilities on GlaxoSmithKline PLC and Pfizer 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 Pfizer. Check out your portfolio center. Please also check ongoing floating volatility patterns of GlaxoSmithKline PLC and Pfizer.
Diversification Opportunities for GlaxoSmithKline PLC and Pfizer
0.75 | Correlation Coefficient |
Poor diversification
The 3 months correlation between GlaxoSmithKline and Pfizer is 0.75. Overlapping area represents the amount of risk that can be diversified away by holding GlaxoSmithKline PLC ADR and Pfizer Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pfizer Inc 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 Pfizer. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Pfizer Inc has no effect on the direction of GlaxoSmithKline PLC i.e., GlaxoSmithKline PLC and Pfizer go up and down completely randomly.
Pair Corralation between GlaxoSmithKline PLC and Pfizer
Considering the 90-day investment horizon GlaxoSmithKline PLC ADR is expected to generate 0.89 times more return on investment than Pfizer. However, GlaxoSmithKline PLC ADR is 1.13 times less risky than Pfizer. It trades about -0.33 of its potential returns per unit of risk. Pfizer Inc is currently generating about -0.3 per unit of risk. If you would invest 3,745 in GlaxoSmithKline PLC ADR on August 27, 2024 and sell it today you would lose (349.00) from holding GlaxoSmithKline PLC ADR or give up 9.32% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
GlaxoSmithKline PLC ADR vs. Pfizer Inc
Performance |
| Timeline |
| GlaxoSmithKline PLC ADR |
| Pfizer Inc |
GlaxoSmithKline PLC and Pfizer Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with GlaxoSmithKline PLC and Pfizer
The main advantage of trading using opposite GlaxoSmithKline PLC and Pfizer positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GlaxoSmithKline PLC position performs unexpectedly, Pfizer 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 Pfizer will offset losses from the drop in Pfizer'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 |
| Pfizer vs. Capricor Therapeutics | Pfizer vs. Soleno Therapeutics | Pfizer vs. Bio Path Holdings | Pfizer vs. Moleculin Biotech |
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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.
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