Correlation Between GlaxoSmithKline PLC and Multifactor Equity
Can any of the company-specific risk be diversified away by investing in both GlaxoSmithKline PLC and Multifactor Equity 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 Multifactor Equity 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 Multifactor Equity Fund, you can compare the effects of market volatilities on GlaxoSmithKline PLC and Multifactor Equity 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 Multifactor Equity. Check out your portfolio center. Please also check ongoing floating volatility patterns of GlaxoSmithKline PLC and Multifactor Equity.
Diversification Opportunities for GlaxoSmithKline PLC and Multifactor Equity
-0.9 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between GlaxoSmithKline and Multifactor is -0.9. Overlapping area represents the amount of risk that can be diversified away by holding GlaxoSmithKline PLC ADR and Multifactor Equity Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Multifactor Equity 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 Multifactor Equity. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Multifactor Equity has no effect on the direction of GlaxoSmithKline PLC i.e., GlaxoSmithKline PLC and Multifactor Equity go up and down completely randomly.
Pair Corralation between GlaxoSmithKline PLC and Multifactor Equity
Considering the 90-day investment horizon GlaxoSmithKline PLC ADR is expected to under-perform the Multifactor Equity. In addition to that, GlaxoSmithKline PLC is 1.64 times more volatile than Multifactor Equity Fund. It trades about -0.23 of its total potential returns per unit of risk. Multifactor Equity Fund is currently generating about 0.38 per unit of volatility. If you would invest 1,949 in Multifactor Equity Fund on September 1, 2024 and sell it today you would earn a total of 131.00 from holding Multifactor Equity Fund or generate 6.72% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Significant |
| Accuracy | 95.45% |
| Values | Daily Returns |
GlaxoSmithKline PLC ADR vs. Multifactor Equity Fund
Performance |
| Timeline |
| GlaxoSmithKline PLC ADR |
| Multifactor Equity |
GlaxoSmithKline PLC and Multifactor Equity Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with GlaxoSmithKline PLC and Multifactor Equity
The main advantage of trading using opposite GlaxoSmithKline PLC and Multifactor Equity positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GlaxoSmithKline PLC position performs unexpectedly, Multifactor Equity 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 Multifactor Equity will offset losses from the drop in Multifactor Equity'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 |
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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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.
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