Correlation Between GlaxoSmithKline PLC and Sumitomo Realty
Can any of the company-specific risk be diversified away by investing in both GlaxoSmithKline PLC and Sumitomo Realty 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 Sumitomo Realty 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 Sumitomo Realty Development, you can compare the effects of market volatilities on GlaxoSmithKline PLC and Sumitomo Realty 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 Sumitomo Realty. Check out your portfolio center. Please also check ongoing floating volatility patterns of GlaxoSmithKline PLC and Sumitomo Realty.
Diversification Opportunities for GlaxoSmithKline PLC and Sumitomo Realty
0.74 | Correlation Coefficient |
Poor diversification
The 3 months correlation between GlaxoSmithKline and Sumitomo is 0.74. Overlapping area represents the amount of risk that can be diversified away by holding GlaxoSmithKline PLC ADR and Sumitomo Realty Development in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sumitomo Realty Deve 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 Sumitomo Realty. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sumitomo Realty Deve has no effect on the direction of GlaxoSmithKline PLC i.e., GlaxoSmithKline PLC and Sumitomo Realty go up and down completely randomly.
Pair Corralation between GlaxoSmithKline PLC and Sumitomo Realty
Considering the 90-day investment horizon GlaxoSmithKline PLC is expected to generate 6.49 times less return on investment than Sumitomo Realty. But when comparing it to its historical volatility, GlaxoSmithKline PLC ADR is 2.32 times less risky than Sumitomo Realty. It trades about 0.02 of its potential returns per unit of risk. Sumitomo Realty Development is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest 2,464 in Sumitomo Realty Development on August 31, 2024 and sell it today you would earn a total of 461.00 from holding Sumitomo Realty Development or generate 18.71% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 55.61% |
| Values | Daily Returns |
GlaxoSmithKline PLC ADR vs. Sumitomo Realty Development
Performance |
| Timeline |
| GlaxoSmithKline PLC ADR |
| Sumitomo Realty Deve |
GlaxoSmithKline PLC and Sumitomo Realty Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with GlaxoSmithKline PLC and Sumitomo Realty
The main advantage of trading using opposite GlaxoSmithKline PLC and Sumitomo Realty positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GlaxoSmithKline PLC position performs unexpectedly, Sumitomo Realty 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 Sumitomo Realty will offset losses from the drop in Sumitomo Realty'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 |
| Sumitomo Realty vs. Jones Lang LaSalle | Sumitomo Realty vs. Cushman Wakefield plc | Sumitomo Realty vs. Colliers International Group | Sumitomo Realty vs. CoStar Group |
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 Equity Valuation module to check real value of public entities based on technical and fundamental data.
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