Correlation Between GlaxoSmithKline PLC and Stoke Therapeutics
Can any of the company-specific risk be diversified away by investing in both GlaxoSmithKline PLC and Stoke Therapeutics 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 Stoke Therapeutics 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 Stoke Therapeutics, you can compare the effects of market volatilities on GlaxoSmithKline PLC and Stoke Therapeutics 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 Stoke Therapeutics. Check out your portfolio center. Please also check ongoing floating volatility patterns of GlaxoSmithKline PLC and Stoke Therapeutics.
Diversification Opportunities for GlaxoSmithKline PLC and Stoke Therapeutics
0.68 | Correlation Coefficient |
Poor diversification
The 3 months correlation between GlaxoSmithKline and Stoke is 0.68. Overlapping area represents the amount of risk that can be diversified away by holding GlaxoSmithKline PLC ADR and Stoke Therapeutics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Stoke Therapeutics 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 Stoke Therapeutics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Stoke Therapeutics has no effect on the direction of GlaxoSmithKline PLC i.e., GlaxoSmithKline PLC and Stoke Therapeutics go up and down completely randomly.
Pair Corralation between GlaxoSmithKline PLC and Stoke Therapeutics
Considering the 90-day investment horizon GlaxoSmithKline PLC is expected to generate 17.31 times less return on investment than Stoke Therapeutics. But when comparing it to its historical volatility, GlaxoSmithKline PLC ADR is 4.64 times less risky than Stoke Therapeutics. It trades about 0.01 of its potential returns per unit of risk. Stoke Therapeutics is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest 770.00 in Stoke Therapeutics on August 30, 2024 and sell it today you would earn a total of 421.00 from holding Stoke Therapeutics or generate 54.68% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
GlaxoSmithKline PLC ADR vs. Stoke Therapeutics
Performance |
| Timeline |
| GlaxoSmithKline PLC ADR |
| Stoke Therapeutics |
GlaxoSmithKline PLC and Stoke Therapeutics Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with GlaxoSmithKline PLC and Stoke Therapeutics
The main advantage of trading using opposite GlaxoSmithKline PLC and Stoke Therapeutics positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GlaxoSmithKline PLC position performs unexpectedly, Stoke Therapeutics 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 Stoke Therapeutics will offset losses from the drop in Stoke Therapeutics' 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 |
| Stoke Therapeutics vs. Ikena Oncology | Stoke Therapeutics vs. Eliem Therapeutics | Stoke Therapeutics vs. HCW Biologics | Stoke Therapeutics vs. RenovoRx |
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 Earnings Calls module to check upcoming earnings announcements updated hourly across public exchanges.
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