Correlation Between GlaxoSmithKline PLC and Partner
Can any of the company-specific risk be diversified away by investing in both GlaxoSmithKline PLC and Partner 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 Partner 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 Partner, you can compare the effects of market volatilities on GlaxoSmithKline PLC and Partner 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 Partner. Check out your portfolio center. Please also check ongoing floating volatility patterns of GlaxoSmithKline PLC and Partner.
Diversification Opportunities for GlaxoSmithKline PLC and Partner
-0.61 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between GlaxoSmithKline and Partner is -0.61. Overlapping area represents the amount of risk that can be diversified away by holding GlaxoSmithKline PLC ADR and Partner in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Partner 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 Partner. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Partner has no effect on the direction of GlaxoSmithKline PLC i.e., GlaxoSmithKline PLC and Partner go up and down completely randomly.
Pair Corralation between GlaxoSmithKline PLC and Partner
Considering the 90-day investment horizon GlaxoSmithKline PLC is expected to generate 8.37 times less return on investment than Partner. But when comparing it to its historical volatility, GlaxoSmithKline PLC ADR is 2.01 times less risky than Partner. It trades about 0.02 of its potential returns per unit of risk. Partner is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest 146,500 in Partner on August 31, 2024 and sell it today you would earn a total of 68,000 from holding Partner or generate 46.42% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 77.81% |
| Values | Daily Returns |
GlaxoSmithKline PLC ADR vs. Partner
Performance |
| Timeline |
| GlaxoSmithKline PLC ADR |
| Partner |
GlaxoSmithKline PLC and Partner Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with GlaxoSmithKline PLC and Partner
The main advantage of trading using opposite GlaxoSmithKline PLC and Partner positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GlaxoSmithKline PLC position performs unexpectedly, Partner 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 Partner will offset losses from the drop in Partner'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 |
| Partner vs. Israel China Biotechnology | Partner vs. The Gold Bond | Partner vs. Overseas Commerce | Partner vs. Big Tech 50 |
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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.
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