Correlation Between GlaxoSmithKline PLC and Virtus International
Can any of the company-specific risk be diversified away by investing in both GlaxoSmithKline PLC and Virtus International 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 Virtus International 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 Virtus International Small Cap, you can compare the effects of market volatilities on GlaxoSmithKline PLC and Virtus International 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 Virtus International. Check out your portfolio center. Please also check ongoing floating volatility patterns of GlaxoSmithKline PLC and Virtus International.
Diversification Opportunities for GlaxoSmithKline PLC and Virtus International
0.59 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between GlaxoSmithKline and Virtus is 0.59. Overlapping area represents the amount of risk that can be diversified away by holding GlaxoSmithKline PLC ADR and Virtus International Small Cap in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Virtus International 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 Virtus International. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Virtus International has no effect on the direction of GlaxoSmithKline PLC i.e., GlaxoSmithKline PLC and Virtus International go up and down completely randomly.
Pair Corralation between GlaxoSmithKline PLC and Virtus International
Considering the 90-day investment horizon GlaxoSmithKline PLC ADR is expected to under-perform the Virtus International. In addition to that, GlaxoSmithKline PLC is 1.88 times more volatile than Virtus International Small Cap. It trades about -0.31 of its total potential returns per unit of risk. Virtus International Small Cap is currently generating about -0.26 per unit of volatility. If you would invest 2,005 in Virtus International Small Cap on August 29, 2024 and sell it today you would lose (83.00) from holding Virtus International Small Cap or give up 4.14% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
GlaxoSmithKline PLC ADR vs. Virtus International Small Cap
Performance |
| Timeline |
| GlaxoSmithKline PLC ADR |
| Virtus International |
GlaxoSmithKline PLC and Virtus International Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with GlaxoSmithKline PLC and Virtus International
The main advantage of trading using opposite GlaxoSmithKline PLC and Virtus International positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GlaxoSmithKline PLC position performs unexpectedly, Virtus International 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 Virtus International will offset losses from the drop in Virtus International'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 |
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 Bonds Directory module to find actively traded corporate debentures issued by US companies.
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