Correlation Between GlaxoSmithKline PLC and Nationwide Investor

Can any of the company-specific risk be diversified away by investing in both GlaxoSmithKline PLC and Nationwide Investor 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 Nationwide Investor 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 Nationwide Investor Destinations, you can compare the effects of market volatilities on GlaxoSmithKline PLC and Nationwide Investor 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 Nationwide Investor. Check out your portfolio center. Please also check ongoing floating volatility patterns of GlaxoSmithKline PLC and Nationwide Investor.

Diversification Opportunities for GlaxoSmithKline PLC and Nationwide Investor

-0.77

Correlation Coefficient

GlaxoSmithKline PLC  Nationwide Investor

Pay attention - limited upside

The 3 months correlation between GlaxoSmithKline and Nationwide is -0.77. Overlapping area represents the amount of risk that can be diversified away by holding GlaxoSmithKline PLC ADR and Nationwide Investor Destinatio in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nationwide Investor 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 Nationwide Investor. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nationwide Investor has no effect on the direction of GlaxoSmithKline PLC i.e., GlaxoSmithKline PLC and Nationwide Investor go up and down completely randomly.

Pair Corralation between GlaxoSmithKline PLC and Nationwide Investor

Considering the 90-day investment horizon GlaxoSmithKline PLC ADR is expected to under-perform the Nationwide Investor. In addition to that, GlaxoSmithKline PLC is 2.93 times more volatile than Nationwide Investor Destinations. It trades about -0.24 of its total potential returns per unit of risk. Nationwide Investor Destinations is currently generating about 0.1 per unit of volatility. If you would invest  1,052  in Nationwide Investor Destinations on August 26, 2024 and sell it today you would earn a total of  23.00  from holding Nationwide Investor Destinations or generate 2.19% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	100.0%
Values	Daily Returns

GlaxoSmithKline PLC ADR  vs.  Nationwide Investor Destinatio

GlaxoSmithKline PLC ADR

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days GlaxoSmithKline PLC ADR has generated negative risk-adjusted returns adding no value to investors with long positions. Despite uncertain performance in the last few months, the Stock's basic indicators remain quite persistent which may send shares a bit higher in December 2024. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

Nationwide Investor

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Nationwide Investor Destinations are ranked lower than 7 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Nationwide Investor is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with GlaxoSmithKline PLC and Nationwide Investor

The main advantage of trading using opposite GlaxoSmithKline PLC and Nationwide Investor positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GlaxoSmithKline PLC position performs unexpectedly, Nationwide Investor 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 Nationwide Investor will offset losses from the drop in Nationwide Investor's long position.

The idea behind GlaxoSmithKline PLC ADR and Nationwide Investor Destinations pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.