Correlation Between GlaxoSmithKline PLC and Vanguard LifeStrategy
Can any of the company-specific risk be diversified away by investing in both GlaxoSmithKline PLC and Vanguard LifeStrategy 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 Vanguard LifeStrategy 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 Vanguard LifeStrategy 20, you can compare the effects of market volatilities on GlaxoSmithKline PLC and Vanguard LifeStrategy 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 Vanguard LifeStrategy. Check out your portfolio center. Please also check ongoing floating volatility patterns of GlaxoSmithKline PLC and Vanguard LifeStrategy.
Diversification Opportunities for GlaxoSmithKline PLC and Vanguard LifeStrategy
-0.43 | Correlation Coefficient |
Very good diversification
The 3 months correlation between GlaxoSmithKline and Vanguard is -0.43. Overlapping area represents the amount of risk that can be diversified away by holding GlaxoSmithKline PLC ADR and Vanguard LifeStrategy 20 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vanguard LifeStrategy 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 Vanguard LifeStrategy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vanguard LifeStrategy has no effect on the direction of GlaxoSmithKline PLC i.e., GlaxoSmithKline PLC and Vanguard LifeStrategy go up and down completely randomly.
Pair Corralation between GlaxoSmithKline PLC and Vanguard LifeStrategy
Considering the 90-day investment horizon GlaxoSmithKline PLC ADR is expected to under-perform the Vanguard LifeStrategy. In addition to that, GlaxoSmithKline PLC is 8.78 times more volatile than Vanguard LifeStrategy 20. It trades about -0.25 of its total potential returns per unit of risk. Vanguard LifeStrategy 20 is currently generating about 0.13 per unit of volatility. If you would invest 2,236 in Vanguard LifeStrategy 20 on August 29, 2024 and sell it today you would earn a total of 32.00 from holding Vanguard LifeStrategy 20 or generate 1.43% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 98.46% |
| Values | Daily Returns |
GlaxoSmithKline PLC ADR vs. Vanguard LifeStrategy 20
Performance |
| Timeline |
| GlaxoSmithKline PLC ADR |
| Vanguard LifeStrategy |
GlaxoSmithKline PLC and Vanguard LifeStrategy Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with GlaxoSmithKline PLC and Vanguard LifeStrategy
The main advantage of trading using opposite GlaxoSmithKline PLC and Vanguard LifeStrategy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GlaxoSmithKline PLC position performs unexpectedly, Vanguard LifeStrategy 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 Vanguard LifeStrategy will offset losses from the drop in Vanguard LifeStrategy'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 |
| Vanguard LifeStrategy vs. Vanguard FTSE All World | Vanguard LifeStrategy vs. Vanguard FTSE Developed | Vanguard LifeStrategy vs. Vanguard FTSE All World | Vanguard LifeStrategy vs. Vanguard FTSE Developed |
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 Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.
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