Correlation Between GlaxoSmithKline PLC and Spencers Retail

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

Diversification Opportunities for GlaxoSmithKline PLC and Spencers Retail

0.84
  Correlation Coefficient

Very poor diversification

The 3 months correlation between GlaxoSmithKline and Spencers is 0.84. Overlapping area represents the amount of risk that can be diversified away by holding GlaxoSmithKline PLC ADR and Spencers Retail Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Spencers Retail 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 Spencers Retail. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Spencers Retail has no effect on the direction of GlaxoSmithKline PLC i.e., GlaxoSmithKline PLC and Spencers Retail go up and down completely randomly.

Pair Corralation between GlaxoSmithKline PLC and Spencers Retail

Considering the 90-day investment horizon GlaxoSmithKline PLC ADR is expected to generate 0.6 times more return on investment than Spencers Retail. However, GlaxoSmithKline PLC ADR is 1.66 times less risky than Spencers Retail. It trades about -0.23 of its potential returns per unit of risk. Spencers Retail Limited is currently generating about -0.2 per unit of risk. If you would invest  3,634  in GlaxoSmithKline PLC ADR on September 1, 2024 and sell it today you would lose (221.00) from holding GlaxoSmithKline PLC ADR or give up 6.08% of portfolio value over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthStrong
Accuracy100.0%
ValuesDaily Returns

GlaxoSmithKline PLC ADR  vs.  Spencers Retail Limited

 Performance 
       Timeline  
GlaxoSmithKline PLC ADR 

Risk-Adjusted Performance

0 of 100

 
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.
Spencers Retail 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days Spencers Retail Limited has generated negative risk-adjusted returns adding no value to investors with long positions. Even with weak performance in the last few months, the Stock's technical and fundamental indicators remain relatively invariable which may send shares a bit higher in December 2024. The latest agitation may also be a sign of long-running up-swing for the enterprise retail investors.

GlaxoSmithKline PLC and Spencers Retail Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with GlaxoSmithKline PLC and Spencers Retail

The main advantage of trading using opposite GlaxoSmithKline PLC and Spencers Retail positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GlaxoSmithKline PLC position performs unexpectedly, Spencers Retail 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 Spencers Retail will offset losses from the drop in Spencers Retail's long position.
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The idea behind GlaxoSmithKline PLC ADR and Spencers Retail Limited 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 Money Managers module to screen money managers from public funds and ETFs managed around the world.

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