Correlation Between GlaxoSmithKline PLC and HLNLN

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Can any of the company-specific risk be diversified away by investing in both GlaxoSmithKline PLC and HLNLN 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 HLNLN 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 HLNLN 4 24 MAR 52, you can compare the effects of market volatilities on GlaxoSmithKline PLC and HLNLN 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 HLNLN. Check out your portfolio center. Please also check ongoing floating volatility patterns of GlaxoSmithKline PLC and HLNLN.

Diversification Opportunities for GlaxoSmithKline PLC and HLNLN

0.68
  Correlation Coefficient

Poor diversification

The 3 months correlation between GlaxoSmithKline and HLNLN is 0.68. Overlapping area represents the amount of risk that can be diversified away by holding GlaxoSmithKline PLC ADR and HLNLN 4 24 MAR 52 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on HLNLN 4 24 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 HLNLN. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of HLNLN 4 24 has no effect on the direction of GlaxoSmithKline PLC i.e., GlaxoSmithKline PLC and HLNLN go up and down completely randomly.

Pair Corralation between GlaxoSmithKline PLC and HLNLN

Considering the 90-day investment horizon GlaxoSmithKline PLC ADR is expected to under-perform the HLNLN. In addition to that, GlaxoSmithKline PLC is 1.38 times more volatile than HLNLN 4 24 MAR 52. It trades about -0.23 of its total potential returns per unit of risk. HLNLN 4 24 MAR 52 is currently generating about -0.26 per unit of volatility. If you would invest  8,535  in HLNLN 4 24 MAR 52 on August 30, 2024 and sell it today you would lose (846.00) from holding HLNLN 4 24 MAR 52 or give up 9.91% of portfolio value over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthSignificant
Accuracy79.07%
ValuesDaily Returns

GlaxoSmithKline PLC ADR  vs.  HLNLN 4 24 MAR 52

 Performance 
       Timeline  
GlaxoSmithKline PLC ADR 

Risk-Adjusted Performance

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Over the last 90 days GlaxoSmithKline PLC ADR has generated negative risk-adjusted returns adding no value to investors with long positions. Despite uncertain performance in the last few months, the Stock's basic indicators remain quite persistent which may send shares a bit higher in December 2024. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.
HLNLN 4 24 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days HLNLN 4 24 MAR 52 has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest inconsistent performance, the Bond's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for HLNLN 4 24 MAR 52 investors.

GlaxoSmithKline PLC and HLNLN Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with GlaxoSmithKline PLC and HLNLN

The main advantage of trading using opposite GlaxoSmithKline PLC and HLNLN positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GlaxoSmithKline PLC position performs unexpectedly, HLNLN 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 HLNLN will offset losses from the drop in HLNLN's long position.
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The idea behind GlaxoSmithKline PLC ADR and HLNLN 4 24 MAR 52 pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.
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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 Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.

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