Correlation Between GlaxoSmithKline PLC and Scandinavian Tobacco
Can any of the company-specific risk be diversified away by investing in both GlaxoSmithKline PLC and Scandinavian Tobacco 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 Scandinavian Tobacco 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 Scandinavian Tobacco Group, you can compare the effects of market volatilities on GlaxoSmithKline PLC and Scandinavian Tobacco 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 Scandinavian Tobacco. Check out your portfolio center. Please also check ongoing floating volatility patterns of GlaxoSmithKline PLC and Scandinavian Tobacco.
Diversification Opportunities for GlaxoSmithKline PLC and Scandinavian Tobacco
0.77 | Correlation Coefficient |
Poor diversification
The 3 months correlation between GlaxoSmithKline and Scandinavian is 0.77. Overlapping area represents the amount of risk that can be diversified away by holding GlaxoSmithKline PLC ADR and Scandinavian Tobacco Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Scandinavian Tobacco 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 Scandinavian Tobacco. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Scandinavian Tobacco has no effect on the direction of GlaxoSmithKline PLC i.e., GlaxoSmithKline PLC and Scandinavian Tobacco go up and down completely randomly.
Pair Corralation between GlaxoSmithKline PLC and Scandinavian Tobacco
Considering the 90-day investment horizon GlaxoSmithKline PLC ADR is expected to under-perform the Scandinavian Tobacco. But the stock apears to be less risky and, when comparing its historical volatility, GlaxoSmithKline PLC ADR is 1.53 times less risky than Scandinavian Tobacco. The stock trades about -0.3 of its potential returns per unit of risk. The Scandinavian Tobacco Group is currently generating about -0.1 of returns per unit of risk over similar time horizon. If you would invest 10,380 in Scandinavian Tobacco Group on August 29, 2024 and sell it today you would lose (530.00) from holding Scandinavian Tobacco Group or give up 5.11% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
GlaxoSmithKline PLC ADR vs. Scandinavian Tobacco Group
Performance |
| Timeline |
| GlaxoSmithKline PLC ADR |
| Scandinavian Tobacco |
GlaxoSmithKline PLC and Scandinavian Tobacco Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with GlaxoSmithKline PLC and Scandinavian Tobacco
The main advantage of trading using opposite GlaxoSmithKline PLC and Scandinavian Tobacco positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GlaxoSmithKline PLC position performs unexpectedly, Scandinavian Tobacco 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 Scandinavian Tobacco will offset losses from the drop in Scandinavian Tobacco'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 |
| Scandinavian Tobacco vs. Matas AS | Scandinavian Tobacco vs. Tryg AS | Scandinavian Tobacco vs. Alm Brand | Scandinavian Tobacco vs. Royal Unibrew AS |
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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.
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