Correlation Between GlaxoSmithKline PLC and VeriSign
Can any of the company-specific risk be diversified away by investing in both GlaxoSmithKline PLC and VeriSign 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 VeriSign 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 VeriSign, you can compare the effects of market volatilities on GlaxoSmithKline PLC and VeriSign 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 VeriSign. Check out your portfolio center. Please also check ongoing floating volatility patterns of GlaxoSmithKline PLC and VeriSign.
Diversification Opportunities for GlaxoSmithKline PLC and VeriSign
-0.65 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between GlaxoSmithKline and VeriSign is -0.65. Overlapping area represents the amount of risk that can be diversified away by holding GlaxoSmithKline PLC ADR and VeriSign in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on VeriSign 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 VeriSign. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of VeriSign has no effect on the direction of GlaxoSmithKline PLC i.e., GlaxoSmithKline PLC and VeriSign go up and down completely randomly.
Pair Corralation between GlaxoSmithKline PLC and VeriSign
Considering the 90-day investment horizon GlaxoSmithKline PLC ADR is expected to generate 0.93 times more return on investment than VeriSign. However, GlaxoSmithKline PLC ADR is 1.08 times less risky than VeriSign. It trades about 0.01 of its potential returns per unit of risk. VeriSign is currently generating about -0.01 per unit of risk. If you would invest 3,385 in GlaxoSmithKline PLC ADR on August 29, 2024 and sell it today you would earn a total of 17.00 from holding GlaxoSmithKline PLC ADR or generate 0.5% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 98.21% |
| Values | Daily Returns |
GlaxoSmithKline PLC ADR vs. VeriSign
Performance |
| Timeline |
| GlaxoSmithKline PLC ADR |
| VeriSign |
GlaxoSmithKline PLC and VeriSign Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with GlaxoSmithKline PLC and VeriSign
The main advantage of trading using opposite GlaxoSmithKline PLC and VeriSign positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GlaxoSmithKline PLC position performs unexpectedly, VeriSign 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 VeriSign will offset losses from the drop in VeriSign'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 |
| VeriSign vs. SCANDMEDICAL SOLDK 040 | VeriSign vs. Beyond Meat | VeriSign vs. MeVis Medical Solutions | VeriSign vs. Advanced Medical Solutions |
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 Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.
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