Correlation Between GlaxoSmithKline PLC and Sinar Mas
Can any of the company-specific risk be diversified away by investing in both GlaxoSmithKline PLC and Sinar Mas 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 Sinar Mas 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 Sinar Mas Agro, you can compare the effects of market volatilities on GlaxoSmithKline PLC and Sinar Mas 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 Sinar Mas. Check out your portfolio center. Please also check ongoing floating volatility patterns of GlaxoSmithKline PLC and Sinar Mas.
Diversification Opportunities for GlaxoSmithKline PLC and Sinar Mas
-0.49 | Correlation Coefficient |
Very good diversification
The 3 months correlation between GlaxoSmithKline and Sinar is -0.49. Overlapping area represents the amount of risk that can be diversified away by holding GlaxoSmithKline PLC ADR and Sinar Mas Agro in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sinar Mas Agro 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 Sinar Mas. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sinar Mas Agro has no effect on the direction of GlaxoSmithKline PLC i.e., GlaxoSmithKline PLC and Sinar Mas go up and down completely randomly.
Pair Corralation between GlaxoSmithKline PLC and Sinar Mas
Considering the 90-day investment horizon GlaxoSmithKline PLC ADR is expected to under-perform the Sinar Mas. But the stock apears to be less risky and, when comparing its historical volatility, GlaxoSmithKline PLC ADR is 1.7 times less risky than Sinar Mas. The stock trades about -0.23 of its potential returns per unit of risk. The Sinar Mas Agro is currently generating about -0.08 of returns per unit of risk over similar time horizon. If you would invest 395,133 in Sinar Mas Agro on August 31, 2024 and sell it today you would lose (16,133) from holding Sinar Mas Agro or give up 4.08% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
GlaxoSmithKline PLC ADR vs. Sinar Mas Agro
Performance |
| Timeline |
| GlaxoSmithKline PLC ADR |
| Sinar Mas Agro |
GlaxoSmithKline PLC and Sinar Mas Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with GlaxoSmithKline PLC and Sinar Mas
The main advantage of trading using opposite GlaxoSmithKline PLC and Sinar Mas positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GlaxoSmithKline PLC position performs unexpectedly, Sinar Mas 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 Sinar Mas will offset losses from the drop in Sinar Mas' 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 |
| Sinar Mas vs. Sampoerna Agro Tbk | Sinar Mas vs. Tunas Baru Lampung | Sinar Mas vs. Perusahaan Perkebunan London | Sinar Mas vs. Bakrie Sumatera Plantations |
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 Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.
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