Correlation Between GlaxoSmithKline PLC and Teradyne
Can any of the company-specific risk be diversified away by investing in both GlaxoSmithKline PLC and Teradyne 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 Teradyne 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 Teradyne, you can compare the effects of market volatilities on GlaxoSmithKline PLC and Teradyne 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 Teradyne. Check out your portfolio center. Please also check ongoing floating volatility patterns of GlaxoSmithKline PLC and Teradyne.
Diversification Opportunities for GlaxoSmithKline PLC and Teradyne
0.8 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between GlaxoSmithKline and Teradyne is 0.8. Overlapping area represents the amount of risk that can be diversified away by holding GlaxoSmithKline PLC ADR and Teradyne in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Teradyne 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 Teradyne. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Teradyne has no effect on the direction of GlaxoSmithKline PLC i.e., GlaxoSmithKline PLC and Teradyne go up and down completely randomly.
Pair Corralation between GlaxoSmithKline PLC and Teradyne
Considering the 90-day investment horizon GlaxoSmithKline PLC ADR is expected to generate 0.63 times more return on investment than Teradyne. However, GlaxoSmithKline PLC ADR is 1.58 times less risky than Teradyne. It trades about -0.23 of its potential returns per unit of risk. Teradyne is currently generating about -0.18 per unit of risk. If you would invest 4,042 in GlaxoSmithKline PLC ADR on August 30, 2024 and sell it today you would lose (609.00) from holding GlaxoSmithKline PLC ADR or give up 15.07% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
GlaxoSmithKline PLC ADR vs. Teradyne
Performance |
| Timeline |
| GlaxoSmithKline PLC ADR |
| Teradyne |
GlaxoSmithKline PLC and Teradyne Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with GlaxoSmithKline PLC and Teradyne
The main advantage of trading using opposite GlaxoSmithKline PLC and Teradyne positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GlaxoSmithKline PLC position performs unexpectedly, Teradyne 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 Teradyne will offset losses from the drop in Teradyne'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 |
| Teradyne vs. First Solar | Teradyne vs. Sunrun Inc | Teradyne vs. Canadian Solar | Teradyne vs. SolarEdge Technologies |
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 Portfolio Dashboard module to portfolio dashboard that provides centralized access to all your investments.
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