Correlation Between GlaxoSmithKline PLC and Short Duration
Can any of the company-specific risk be diversified away by investing in both GlaxoSmithKline PLC and Short Duration 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 Short Duration 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 Short Duration Bond, you can compare the effects of market volatilities on GlaxoSmithKline PLC and Short Duration 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 Short Duration. Check out your portfolio center. Please also check ongoing floating volatility patterns of GlaxoSmithKline PLC and Short Duration.
Diversification Opportunities for GlaxoSmithKline PLC and Short Duration
0.43 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between GlaxoSmithKline and Short is 0.43. Overlapping area represents the amount of risk that can be diversified away by holding GlaxoSmithKline PLC ADR and Short Duration Bond in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Short Duration 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 Short Duration. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Short Duration Bond has no effect on the direction of GlaxoSmithKline PLC i.e., GlaxoSmithKline PLC and Short Duration go up and down completely randomly.
Pair Corralation between GlaxoSmithKline PLC and Short Duration
Considering the 90-day investment horizon GlaxoSmithKline PLC is expected to generate 2.07 times less return on investment than Short Duration. In addition to that, GlaxoSmithKline PLC is 8.36 times more volatile than Short Duration Bond. It trades about 0.01 of its total potential returns per unit of risk. Short Duration Bond is currently generating about 0.12 per unit of volatility. If you would invest 1,715 in Short Duration Bond on August 29, 2024 and sell it today you would earn a total of 164.00 from holding Short Duration Bond or generate 9.56% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
GlaxoSmithKline PLC ADR vs. Short Duration Bond
Performance |
| Timeline |
| GlaxoSmithKline PLC ADR |
| Short Duration Bond |
GlaxoSmithKline PLC and Short Duration Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with GlaxoSmithKline PLC and Short Duration
The main advantage of trading using opposite GlaxoSmithKline PLC and Short Duration positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GlaxoSmithKline PLC position performs unexpectedly, Short Duration 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 Short Duration will offset losses from the drop in Short Duration'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 |
| Short Duration vs. Ab Bond Inflation | Short Duration vs. Western Asset Inflation | Short Duration vs. Vy Blackrock Inflation | Short Duration vs. Guidepath Managed Futures |
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 Content Syndication module to quickly integrate customizable finance content to your own investment portal.
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