Correlation Between GlaxoSmithKline PLC and Soditech
Can any of the company-specific risk be diversified away by investing in both GlaxoSmithKline PLC and Soditech 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 Soditech 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 Soditech SA, you can compare the effects of market volatilities on GlaxoSmithKline PLC and Soditech 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 Soditech. Check out your portfolio center. Please also check ongoing floating volatility patterns of GlaxoSmithKline PLC and Soditech.
Diversification Opportunities for GlaxoSmithKline PLC and Soditech
0.08 | Correlation Coefficient |
Significant diversification
The 3 months correlation between GlaxoSmithKline and Soditech is 0.08. Overlapping area represents the amount of risk that can be diversified away by holding GlaxoSmithKline PLC ADR and Soditech SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Soditech SA 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 Soditech. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Soditech SA has no effect on the direction of GlaxoSmithKline PLC i.e., GlaxoSmithKline PLC and Soditech go up and down completely randomly.
Pair Corralation between GlaxoSmithKline PLC and Soditech
Considering the 90-day investment horizon GlaxoSmithKline PLC ADR is expected to under-perform the Soditech. But the stock apears to be less risky and, when comparing its historical volatility, GlaxoSmithKline PLC ADR is 2.88 times less risky than Soditech. The stock trades about -0.25 of its potential returns per unit of risk. The Soditech SA is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest 126.00 in Soditech SA on August 29, 2024 and sell it today you would lose (1.00) from holding Soditech SA or give up 0.79% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 97.67% |
| Values | Daily Returns |
GlaxoSmithKline PLC ADR vs. Soditech SA
Performance |
| Timeline |
| GlaxoSmithKline PLC ADR |
| Soditech SA |
GlaxoSmithKline PLC and Soditech Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with GlaxoSmithKline PLC and Soditech
The main advantage of trading using opposite GlaxoSmithKline PLC and Soditech positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GlaxoSmithKline PLC position performs unexpectedly, Soditech 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 Soditech will offset losses from the drop in Soditech'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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.
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