Correlation Between GlaxoSmithKline Plc and Verizon Communications
Can any of the company-specific risk be diversified away by investing in both GlaxoSmithKline Plc and Verizon Communications 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 Verizon Communications into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between GlaxoSmithKline plc and Verizon Communications, you can compare the effects of market volatilities on GlaxoSmithKline Plc and Verizon Communications 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 Verizon Communications. Check out your portfolio center. Please also check ongoing floating volatility patterns of GlaxoSmithKline Plc and Verizon Communications.
Diversification Opportunities for GlaxoSmithKline Plc and Verizon Communications
-0.18 | Correlation Coefficient |
Good diversification
The 3 months correlation between GlaxoSmithKline and Verizon is -0.18. Overlapping area represents the amount of risk that can be diversified away by holding GlaxoSmithKline plc and Verizon Communications in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Verizon Communications 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 are associated (or correlated) with Verizon Communications. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Verizon Communications has no effect on the direction of GlaxoSmithKline Plc i.e., GlaxoSmithKline Plc and Verizon Communications go up and down completely randomly.
Pair Corralation between GlaxoSmithKline Plc and Verizon Communications
Assuming the 90 days trading horizon GlaxoSmithKline Plc is expected to generate 1.73 times less return on investment than Verizon Communications. But when comparing it to its historical volatility, GlaxoSmithKline plc is 1.31 times less risky than Verizon Communications. It trades about 0.03 of its potential returns per unit of risk. Verizon Communications is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest 65,165 in Verizon Communications on September 3, 2024 and sell it today you would earn a total of 25,585 from holding Verizon Communications or generate 39.26% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
GlaxoSmithKline plc vs. Verizon Communications
Performance |
| Timeline |
| GlaxoSmithKline plc |
| Verizon Communications |
GlaxoSmithKline Plc and Verizon Communications Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with GlaxoSmithKline Plc and Verizon Communications
The main advantage of trading using opposite GlaxoSmithKline Plc and Verizon Communications positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GlaxoSmithKline Plc position performs unexpectedly, Verizon Communications 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 Verizon Communications will offset losses from the drop in Verizon Communications' long position.| GlaxoSmithKline Plc vs. Lloyds Banking Group | GlaxoSmithKline Plc vs. Southern Copper | GlaxoSmithKline Plc vs. Genworth Financial | GlaxoSmithKline Plc vs. Costco Wholesale |
| Verizon Communications vs. FibraHotel | Verizon Communications vs. Applied Materials | Verizon Communications vs. Lloyds Banking Group | Verizon Communications vs. McEwen Mining |
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 Technical Analysis module to check basic technical indicators and analysis based on most latest market data.
Other Complementary Tools
| Sectors List of equity sectors categorizing publicly traded companies based on their primary business activities | |
| Portfolio Holdings Check your current holdings and cash postion to detemine if your portfolio needs rebalancing | |
| Instant Ratings Determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance | |
| Pair Correlation Compare performance and examine fundamental relationship between any two equity instruments | |
| Portfolio Manager State of the art Portfolio Manager to monitor and improve performance of your invested capital |