Correlation Between GlaxoSmithKline PLC and Mainstay Large

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

Diversification Opportunities for GlaxoSmithKline PLC and Mainstay Large

-0.9

Correlation Coefficient

GlaxoSmithKline PLC  Mainstay Large

Pay attention - limited upside

The 3 months correlation between GlaxoSmithKline and Mainstay is -0.9. Overlapping area represents the amount of risk that can be diversified away by holding GlaxoSmithKline PLC ADR and Mainstay Large Cap in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Mainstay Large Cap 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 Mainstay Large. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Mainstay Large Cap has no effect on the direction of GlaxoSmithKline PLC i.e., GlaxoSmithKline PLC and Mainstay Large go up and down completely randomly.

Pair Corralation between GlaxoSmithKline PLC and Mainstay Large

Considering the 90-day investment horizon GlaxoSmithKline PLC ADR is expected to under-perform the Mainstay Large. In addition to that, GlaxoSmithKline PLC is 1.52 times more volatile than Mainstay Large Cap. It trades about -0.24 of its total potential returns per unit of risk. Mainstay Large Cap is currently generating about 0.16 per unit of volatility. If you would invest  1,344  in Mainstay Large Cap on August 28, 2024 and sell it today you would earn a total of  93.00  from holding Mainstay Large Cap or generate 6.92% return on investment over 90 days.

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

GlaxoSmithKline PLC ADR  vs.  Mainstay Large Cap

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.

Mainstay Large Cap

Risk-Adjusted Performance

11 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Mainstay Large Cap are ranked lower than 11 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak basic indicators, Mainstay Large may actually be approaching a critical reversion point that can send shares even higher in December 2024.

Pair Trading with GlaxoSmithKline PLC and Mainstay Large

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

The idea behind GlaxoSmithKline PLC ADR and Mainstay Large Cap 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.