Correlation Between GlaxoSmithKline PLC and Companhia
Can any of the company-specific risk be diversified away by investing in both GlaxoSmithKline PLC and Companhia 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 Companhia 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 Companhia de Saneamento, you can compare the effects of market volatilities on GlaxoSmithKline PLC and Companhia 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 Companhia. Check out your portfolio center. Please also check ongoing floating volatility patterns of GlaxoSmithKline PLC and Companhia.
Diversification Opportunities for GlaxoSmithKline PLC and Companhia
0.15 | Correlation Coefficient |
Average diversification
The 3 months correlation between GlaxoSmithKline and Companhia is 0.15. Overlapping area represents the amount of risk that can be diversified away by holding GlaxoSmithKline PLC ADR and Companhia de Saneamento in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Companhia de Saneamento 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 Companhia. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Companhia de Saneamento has no effect on the direction of GlaxoSmithKline PLC i.e., GlaxoSmithKline PLC and Companhia go up and down completely randomly.
Pair Corralation between GlaxoSmithKline PLC and Companhia
Considering the 90-day investment horizon GlaxoSmithKline PLC is expected to generate 31.71 times less return on investment than Companhia. But when comparing it to its historical volatility, GlaxoSmithKline PLC ADR is 1.35 times less risky than Companhia. It trades about 0.0 of its potential returns per unit of risk. Companhia de Saneamento is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest 1,216 in Companhia de Saneamento on August 25, 2024 and sell it today you would earn a total of 404.00 from holding Companhia de Saneamento or generate 33.22% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 98.81% |
| Values | Daily Returns |
GlaxoSmithKline PLC ADR vs. Companhia de Saneamento
Performance |
| Timeline |
| GlaxoSmithKline PLC ADR |
| Companhia de Saneamento |
GlaxoSmithKline PLC and Companhia Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with GlaxoSmithKline PLC and Companhia
The main advantage of trading using opposite GlaxoSmithKline PLC and Companhia positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GlaxoSmithKline PLC position performs unexpectedly, Companhia 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 Companhia will offset losses from the drop in Companhia'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 |
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 Portfolio Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.
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