Correlation Between GlaxoSmithKline PLC and ENN Energy
Can any of the company-specific risk be diversified away by investing in both GlaxoSmithKline PLC and ENN Energy 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 ENN Energy 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 ENN Energy Holdings, you can compare the effects of market volatilities on GlaxoSmithKline PLC and ENN Energy 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 ENN Energy. Check out your portfolio center. Please also check ongoing floating volatility patterns of GlaxoSmithKline PLC and ENN Energy.
Diversification Opportunities for GlaxoSmithKline PLC and ENN Energy
-0.45 | Correlation Coefficient |
Very good diversification
The 3 months correlation between GlaxoSmithKline and ENN is -0.45. Overlapping area represents the amount of risk that can be diversified away by holding GlaxoSmithKline PLC ADR and ENN Energy Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ENN Energy Holdings 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 ENN Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ENN Energy Holdings has no effect on the direction of GlaxoSmithKline PLC i.e., GlaxoSmithKline PLC and ENN Energy go up and down completely randomly.
Pair Corralation between GlaxoSmithKline PLC and ENN Energy
Considering the 90-day investment horizon GlaxoSmithKline PLC ADR is expected to generate 0.44 times more return on investment than ENN Energy. However, GlaxoSmithKline PLC ADR is 2.28 times less risky than ENN Energy. It trades about 0.02 of its potential returns per unit of risk. ENN Energy Holdings is currently generating about -0.04 per unit of risk. If you would invest 3,273 in GlaxoSmithKline PLC ADR on August 31, 2024 and sell it today you would earn a total of 140.00 from holding GlaxoSmithKline PLC ADR or generate 4.28% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
GlaxoSmithKline PLC ADR vs. ENN Energy Holdings
Performance |
| Timeline |
| GlaxoSmithKline PLC ADR |
| ENN Energy Holdings |
GlaxoSmithKline PLC and ENN Energy Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with GlaxoSmithKline PLC and ENN Energy
The main advantage of trading using opposite GlaxoSmithKline PLC and ENN Energy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GlaxoSmithKline PLC position performs unexpectedly, ENN Energy 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 ENN Energy will offset losses from the drop in ENN Energy'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 |
| ENN Energy vs. Atmos Energy | ENN Energy vs. LCI Industries | ENN Energy vs. Golden Agri Resources | ENN Energy vs. Empire State Realty |
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 Global Correlations module to find global opportunities by holding instruments from different markets.
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