Correlation Between GlaxoSmithKline PLC and US Treasury
Can any of the company-specific risk be diversified away by investing in both GlaxoSmithKline PLC and US Treasury 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 US Treasury 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 US Treasury 7, you can compare the effects of market volatilities on GlaxoSmithKline PLC and US Treasury 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 US Treasury. Check out your portfolio center. Please also check ongoing floating volatility patterns of GlaxoSmithKline PLC and US Treasury.
Diversification Opportunities for GlaxoSmithKline PLC and US Treasury
0.88 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between GlaxoSmithKline and USVN is 0.88. Overlapping area represents the amount of risk that can be diversified away by holding GlaxoSmithKline PLC ADR and US Treasury 7 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on US Treasury 7 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 US Treasury. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of US Treasury 7 has no effect on the direction of GlaxoSmithKline PLC i.e., GlaxoSmithKline PLC and US Treasury go up and down completely randomly.
Pair Corralation between GlaxoSmithKline PLC and US Treasury
Considering the 90-day investment horizon GlaxoSmithKline PLC ADR is expected to under-perform the US Treasury. In addition to that, GlaxoSmithKline PLC is 3.6 times more volatile than US Treasury 7. It trades about -0.3 of its total potential returns per unit of risk. US Treasury 7 is currently generating about 0.02 per unit of volatility. If you would invest 4,775 in US Treasury 7 on August 28, 2024 and sell it today you would earn a total of 6.00 from holding US Treasury 7 or generate 0.13% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
GlaxoSmithKline PLC ADR vs. US Treasury 7
Performance |
| Timeline |
| GlaxoSmithKline PLC ADR |
| US Treasury 7 |
GlaxoSmithKline PLC and US Treasury Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with GlaxoSmithKline PLC and US Treasury
The main advantage of trading using opposite GlaxoSmithKline PLC and US Treasury positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GlaxoSmithKline PLC position performs unexpectedly, US Treasury 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 US Treasury will offset losses from the drop in US Treasury'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 |
| US Treasury vs. US Treasury 3 | US Treasury vs. US Treasury 30 | US Treasury vs. US Treasury 5 | US Treasury vs. US Treasury 20 |
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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.
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