Correlation Between GlaxoSmithKline PLC and SDX Energy
Can any of the company-specific risk be diversified away by investing in both GlaxoSmithKline PLC and SDX Energy 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 SDX Energy 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 SDX Energy plc, you can compare the effects of market volatilities on GlaxoSmithKline PLC and SDX Energy 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 SDX Energy. Check out your portfolio center. Please also check ongoing floating volatility patterns of GlaxoSmithKline PLC and SDX Energy.
Diversification Opportunities for GlaxoSmithKline PLC and SDX Energy
0.11 | Correlation Coefficient |
Average diversification
The 3 months correlation between GlaxoSmithKline and SDX is 0.11. Overlapping area represents the amount of risk that can be diversified away by holding GlaxoSmithKline PLC ADR and SDX Energy plc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SDX Energy plc 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 SDX Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SDX Energy plc has no effect on the direction of GlaxoSmithKline PLC i.e., GlaxoSmithKline PLC and SDX Energy go up and down completely randomly.
Pair Corralation between GlaxoSmithKline PLC and SDX Energy
Considering the 90-day investment horizon GlaxoSmithKline PLC ADR is expected to under-perform the SDX Energy. But the stock apears to be less risky and, when comparing its historical volatility, GlaxoSmithKline PLC ADR is 27.65 times less risky than SDX Energy. The stock trades about -0.23 of its potential returns per unit of risk. The SDX Energy plc is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest 1.92 in SDX Energy plc on September 1, 2024 and sell it today you would lose (1.21) from holding SDX Energy plc or give up 63.02% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 91.3% |
| Values | Daily Returns |
GlaxoSmithKline PLC ADR vs. SDX Energy plc
Performance |
| Timeline |
| GlaxoSmithKline PLC ADR |
| SDX Energy plc |
GlaxoSmithKline PLC and SDX Energy Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with GlaxoSmithKline PLC and SDX Energy
The main advantage of trading using opposite GlaxoSmithKline PLC and SDX Energy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GlaxoSmithKline PLC position performs unexpectedly, SDX Energy 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 SDX Energy will offset losses from the drop in SDX Energy'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 |
| SDX Energy vs. Permian Resources | SDX Energy vs. Devon Energy | SDX Energy vs. EOG Resources | SDX Energy vs. Coterra Energy |
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 Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.
Other Complementary Tools
| Portfolio Volatility Check portfolio volatility and analyze historical return density to properly model market risk | |
| Portfolio Backtesting Avoid under-diversification and over-optimization by backtesting your portfolios | |
| Share Portfolio Track or share privately all of your investments from the convenience of any device | |
| Portfolio Dashboard Portfolio dashboard that provides centralized access to all your investments | |
| Portfolio Diagnostics Use generated alerts and portfolio events aggregator to diagnose current holdings |