Correlation Between GlaxoSmithKline PLC and United Breweries
Can any of the company-specific risk be diversified away by investing in both GlaxoSmithKline PLC and United Breweries 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 United Breweries 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 United Breweries Limited, you can compare the effects of market volatilities on GlaxoSmithKline PLC and United Breweries 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 United Breweries. Check out your portfolio center. Please also check ongoing floating volatility patterns of GlaxoSmithKline PLC and United Breweries.
Diversification Opportunities for GlaxoSmithKline PLC and United Breweries
0.64 | Correlation Coefficient |
Poor diversification
The 3 months correlation between GlaxoSmithKline and United is 0.64. Overlapping area represents the amount of risk that can be diversified away by holding GlaxoSmithKline PLC ADR and United Breweries Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on United Breweries 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 United Breweries. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of United Breweries has no effect on the direction of GlaxoSmithKline PLC i.e., GlaxoSmithKline PLC and United Breweries go up and down completely randomly.
Pair Corralation between GlaxoSmithKline PLC and United Breweries
Considering the 90-day investment horizon GlaxoSmithKline PLC ADR is expected to under-perform the United Breweries. But the stock apears to be less risky and, when comparing its historical volatility, GlaxoSmithKline PLC ADR is 1.18 times less risky than United Breweries. The stock trades about 0.0 of its potential returns per unit of risk. The United Breweries Limited is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest 169,357 in United Breweries Limited on August 29, 2024 and sell it today you would earn a total of 20,968 from holding United Breweries Limited or generate 12.38% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 97.59% |
| Values | Daily Returns |
GlaxoSmithKline PLC ADR vs. United Breweries Limited
Performance |
| Timeline |
| GlaxoSmithKline PLC ADR |
| United Breweries |
GlaxoSmithKline PLC and United Breweries Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with GlaxoSmithKline PLC and United Breweries
The main advantage of trading using opposite GlaxoSmithKline PLC and United Breweries positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GlaxoSmithKline PLC position performs unexpectedly, United Breweries 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 United Breweries will offset losses from the drop in United Breweries' 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 |
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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.
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