Correlation Between GlaxoSmithKline PLC and Trinseo SA
Can any of the company-specific risk be diversified away by investing in both GlaxoSmithKline PLC and Trinseo SA 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 Trinseo SA 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 Trinseo SA, you can compare the effects of market volatilities on GlaxoSmithKline PLC and Trinseo SA 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 Trinseo SA. Check out your portfolio center. Please also check ongoing floating volatility patterns of GlaxoSmithKline PLC and Trinseo SA.
Diversification Opportunities for GlaxoSmithKline PLC and Trinseo SA
0.07 | Correlation Coefficient |
Significant diversification
The 3 months correlation between GlaxoSmithKline and Trinseo is 0.07. Overlapping area represents the amount of risk that can be diversified away by holding GlaxoSmithKline PLC ADR and Trinseo SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Trinseo SA 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 Trinseo SA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Trinseo SA has no effect on the direction of GlaxoSmithKline PLC i.e., GlaxoSmithKline PLC and Trinseo SA go up and down completely randomly.
Pair Corralation between GlaxoSmithKline PLC and Trinseo SA
Considering the 90-day investment horizon GlaxoSmithKline PLC ADR is expected to under-perform the Trinseo SA. But the stock apears to be less risky and, when comparing its historical volatility, GlaxoSmithKline PLC ADR is 5.01 times less risky than Trinseo SA. The stock trades about -0.23 of its potential returns per unit of risk. The Trinseo SA is currently generating about -0.04 of returns per unit of risk over similar time horizon. If you would invest 479.00 in Trinseo SA on August 31, 2024 and sell it today you would lose (43.00) from holding Trinseo SA or give up 8.98% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
GlaxoSmithKline PLC ADR vs. Trinseo SA
Performance |
| Timeline |
| GlaxoSmithKline PLC ADR |
| Trinseo SA |
GlaxoSmithKline PLC and Trinseo SA Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with GlaxoSmithKline PLC and Trinseo SA
The main advantage of trading using opposite GlaxoSmithKline PLC and Trinseo SA positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GlaxoSmithKline PLC position performs unexpectedly, Trinseo SA 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 Trinseo SA will offset losses from the drop in Trinseo SA'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 |
| Trinseo SA vs. Eastman Chemical | Trinseo SA vs. Linde plc Ordinary | Trinseo SA vs. Ecolab Inc | Trinseo SA vs. Sherwin Williams Co |
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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.
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