Correlation Between GlaxoSmithKline PLC and Capital World
Can any of the company-specific risk be diversified away by investing in both GlaxoSmithKline PLC and Capital World 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 Capital World 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 Capital World Bond, you can compare the effects of market volatilities on GlaxoSmithKline PLC and Capital World 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 Capital World. Check out your portfolio center. Please also check ongoing floating volatility patterns of GlaxoSmithKline PLC and Capital World.
Diversification Opportunities for GlaxoSmithKline PLC and Capital World
0.85 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between GlaxoSmithKline and Capital is 0.85. Overlapping area represents the amount of risk that can be diversified away by holding GlaxoSmithKline PLC ADR and Capital World Bond in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Capital World Bond 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 Capital World. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Capital World Bond has no effect on the direction of GlaxoSmithKline PLC i.e., GlaxoSmithKline PLC and Capital World go up and down completely randomly.
Pair Corralation between GlaxoSmithKline PLC and Capital World
Considering the 90-day investment horizon GlaxoSmithKline PLC ADR is expected to under-perform the Capital World. In addition to that, GlaxoSmithKline PLC is 3.72 times more volatile than Capital World Bond. It trades about -0.3 of its total potential returns per unit of risk. Capital World Bond is currently generating about -0.19 per unit of volatility. If you would invest 1,620 in Capital World Bond on August 27, 2024 and sell it today you would lose (25.00) from holding Capital World Bond or give up 1.54% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
GlaxoSmithKline PLC ADR vs. Capital World Bond
Performance |
| Timeline |
| GlaxoSmithKline PLC ADR |
| Capital World Bond |
GlaxoSmithKline PLC and Capital World Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with GlaxoSmithKline PLC and Capital World
The main advantage of trading using opposite GlaxoSmithKline PLC and Capital World positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GlaxoSmithKline PLC position performs unexpectedly, Capital World 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 Capital World will offset losses from the drop in Capital World'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 |
| Capital World vs. Income Fund Of | Capital World vs. New World Fund | Capital World vs. American Mutual Fund | Capital World vs. American Mutual Fund |
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 Headlines Timeline module to stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity.
Other Complementary Tools
| Price Ceiling Movement Calculate and plot Price Ceiling Movement for different equity instruments | |
| Stocks Directory Find actively traded stocks across global markets | |
| Bonds Directory Find actively traded corporate debentures issued by US companies | |
| Investing Opportunities Build portfolios using our predefined set of ideas and optimize them against your investing preferences | |
| Efficient Frontier Plot and analyze your portfolio and positions against risk-return landscape of the market. |