Correlation Between GlaxoSmithKline PLC and Western Forest
Can any of the company-specific risk be diversified away by investing in both GlaxoSmithKline PLC and Western Forest 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 Western Forest 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 Western Forest Products, you can compare the effects of market volatilities on GlaxoSmithKline PLC and Western Forest 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 Western Forest. Check out your portfolio center. Please also check ongoing floating volatility patterns of GlaxoSmithKline PLC and Western Forest.
Diversification Opportunities for GlaxoSmithKline PLC and Western Forest
-0.1 | Correlation Coefficient |
Good diversification
The 3 months correlation between GlaxoSmithKline and Western is -0.1. Overlapping area represents the amount of risk that can be diversified away by holding GlaxoSmithKline PLC ADR and Western Forest Products in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Western Forest Products 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 Western Forest. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Western Forest Products has no effect on the direction of GlaxoSmithKline PLC i.e., GlaxoSmithKline PLC and Western Forest go up and down completely randomly.
Pair Corralation between GlaxoSmithKline PLC and Western Forest
Considering the 90-day investment horizon GlaxoSmithKline PLC ADR is expected to generate 0.3 times more return on investment than Western Forest. However, GlaxoSmithKline PLC ADR is 3.37 times less risky than Western Forest. It trades about -0.23 of its potential returns per unit of risk. Western Forest Products is currently generating about -0.09 per unit of risk. If you would invest 3,634 in GlaxoSmithKline PLC ADR on September 1, 2024 and sell it today you would lose (221.00) from holding GlaxoSmithKline PLC ADR or give up 6.08% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 95.45% |
| Values | Daily Returns |
GlaxoSmithKline PLC ADR vs. Western Forest Products
Performance |
| Timeline |
| GlaxoSmithKline PLC ADR |
| Western Forest Products |
GlaxoSmithKline PLC and Western Forest Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with GlaxoSmithKline PLC and Western Forest
The main advantage of trading using opposite GlaxoSmithKline PLC and Western Forest positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GlaxoSmithKline PLC position performs unexpectedly, Western Forest 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 Western Forest will offset losses from the drop in Western Forest'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 |
| Western Forest vs. Interfor Corp | Western Forest vs. Canfor | Western Forest vs. West Fraser Timber | Western Forest vs. Stella Jones |
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 Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.
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