Correlation Between GlaxoSmithKline PLC and STM Group
Can any of the company-specific risk be diversified away by investing in both GlaxoSmithKline PLC and STM Group 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 STM Group 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 STM Group Plc, you can compare the effects of market volatilities on GlaxoSmithKline PLC and STM Group 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 STM Group. Check out your portfolio center. Please also check ongoing floating volatility patterns of GlaxoSmithKline PLC and STM Group.
Diversification Opportunities for GlaxoSmithKline PLC and STM Group
-0.91 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between GlaxoSmithKline and STM is -0.91. Overlapping area represents the amount of risk that can be diversified away by holding GlaxoSmithKline PLC ADR and STM Group Plc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on STM Group 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 STM Group. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of STM Group Plc has no effect on the direction of GlaxoSmithKline PLC i.e., GlaxoSmithKline PLC and STM Group go up and down completely randomly.
Pair Corralation between GlaxoSmithKline PLC and STM Group
Considering the 90-day investment horizon GlaxoSmithKline PLC ADR is expected to under-perform the STM Group. But the stock apears to be less risky and, when comparing its historical volatility, GlaxoSmithKline PLC ADR is 1.77 times less risky than STM Group. The stock trades about -0.31 of its potential returns per unit of risk. The STM Group Plc is currently generating about 0.15 of returns per unit of risk over similar time horizon. If you would invest 6,050 in STM Group Plc on August 29, 2024 and sell it today you would earn a total of 100.00 from holding STM Group Plc or generate 1.65% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Significant |
| Accuracy | 22.73% |
| Values | Daily Returns |
GlaxoSmithKline PLC ADR vs. STM Group Plc
Performance |
| Timeline |
| GlaxoSmithKline PLC ADR |
| STM Group Plc |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Good
GlaxoSmithKline PLC and STM Group Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with GlaxoSmithKline PLC and STM Group
The main advantage of trading using opposite GlaxoSmithKline PLC and STM Group positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GlaxoSmithKline PLC position performs unexpectedly, STM Group 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 STM Group will offset losses from the drop in STM Group'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 |
| STM Group vs. Silvercorp Metals | STM Group vs. Bisichi Mining PLC | STM Group vs. International Consolidated Airlines | STM Group vs. Greenroc Mining PLC |
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 Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.
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