Correlation Between GlaxoSmithKline PLC and SBI Life

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Can any of the company-specific risk be diversified away by investing in both GlaxoSmithKline PLC and SBI Life 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 SBI Life 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 SBI Life Insurance, you can compare the effects of market volatilities on GlaxoSmithKline PLC and SBI Life 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 SBI Life. Check out your portfolio center. Please also check ongoing floating volatility patterns of GlaxoSmithKline PLC and SBI Life.

Diversification Opportunities for GlaxoSmithKline PLC and SBI Life

0.9
  Correlation Coefficient

Almost no diversification

The 3 months correlation between GlaxoSmithKline and SBI is 0.9. Overlapping area represents the amount of risk that can be diversified away by holding GlaxoSmithKline PLC ADR and SBI Life Insurance in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SBI Life Insurance 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 SBI Life. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SBI Life Insurance has no effect on the direction of GlaxoSmithKline PLC i.e., GlaxoSmithKline PLC and SBI Life go up and down completely randomly.

Pair Corralation between GlaxoSmithKline PLC and SBI Life

Considering the 90-day investment horizon GlaxoSmithKline PLC ADR is expected to under-perform the SBI Life. But the stock apears to be less risky and, when comparing its historical volatility, GlaxoSmithKline PLC ADR is 1.12 times less risky than SBI Life. The stock trades about 0.0 of its potential returns per unit of risk. The SBI Life Insurance is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest  145,139  in SBI Life Insurance on August 29, 2024 and sell it today you would earn a total of  5,536  from holding SBI Life Insurance or generate 3.81% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthVery Strong
Accuracy97.59%
ValuesDaily Returns

GlaxoSmithKline PLC ADR  vs.  SBI Life Insurance

 Performance 
       Timeline  
GlaxoSmithKline PLC ADR 

Risk-Adjusted Performance

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Weak
 
Strong
Very Weak
Over the last 90 days GlaxoSmithKline PLC ADR has generated negative risk-adjusted returns adding no value to investors with long positions. Despite uncertain performance in the last few months, the Stock's basic indicators remain quite persistent which may send shares a bit higher in December 2024. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.
SBI Life Insurance 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days SBI Life Insurance has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unsteady performance in the last few months, the Stock's forward indicators remain rather sound which may send shares a bit higher in December 2024. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

GlaxoSmithKline PLC and SBI Life Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with GlaxoSmithKline PLC and SBI Life

The main advantage of trading using opposite GlaxoSmithKline PLC and SBI Life positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GlaxoSmithKline PLC position performs unexpectedly, SBI Life 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 SBI Life will offset losses from the drop in SBI Life's long position.
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The idea behind GlaxoSmithKline PLC ADR and SBI Life Insurance pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.
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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 Stock Screener module to find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook..

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