Correlation Between GlaxoSmithKline PLC and Valens
Can any of the company-specific risk be diversified away by investing in both GlaxoSmithKline PLC and Valens 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 Valens 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 Valens, you can compare the effects of market volatilities on GlaxoSmithKline PLC and Valens 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 Valens. Check out your portfolio center. Please also check ongoing floating volatility patterns of GlaxoSmithKline PLC and Valens.
Diversification Opportunities for GlaxoSmithKline PLC and Valens
0.44 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between GlaxoSmithKline and Valens is 0.44. Overlapping area represents the amount of risk that can be diversified away by holding GlaxoSmithKline PLC ADR and Valens in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Valens 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 Valens. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Valens has no effect on the direction of GlaxoSmithKline PLC i.e., GlaxoSmithKline PLC and Valens go up and down completely randomly.
Pair Corralation between GlaxoSmithKline PLC and Valens
Considering the 90-day investment horizon GlaxoSmithKline PLC ADR is expected to under-perform the Valens. But the stock apears to be less risky and, when comparing its historical volatility, GlaxoSmithKline PLC ADR is 3.03 times less risky than Valens. The stock trades about -0.33 of its potential returns per unit of risk. The Valens is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest 198.00 in Valens on August 27, 2024 and sell it today you would lose (2.00) from holding Valens or give up 1.01% 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. Valens
Performance |
| Timeline |
| GlaxoSmithKline PLC ADR |
| Valens |
GlaxoSmithKline PLC and Valens Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with GlaxoSmithKline PLC and Valens
The main advantage of trading using opposite GlaxoSmithKline PLC and Valens positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GlaxoSmithKline PLC position performs unexpectedly, Valens 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 Valens will offset losses from the drop in Valens' 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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.
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