Correlation Between GlaxoSmithKline PLC and Us Defensive

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

Diversification Opportunities for GlaxoSmithKline PLC and Us Defensive

-0.84

Correlation Coefficient

GlaxoSmithKline PLC  Us Defensive

Pay attention - limited upside

The 3 months correlation between GlaxoSmithKline and REUYX is -0.84. Overlapping area represents the amount of risk that can be diversified away by holding GlaxoSmithKline PLC ADR and Us Defensive Equity in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Us Defensive Equity 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 Us Defensive. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Us Defensive Equity has no effect on the direction of GlaxoSmithKline PLC i.e., GlaxoSmithKline PLC and Us Defensive go up and down completely randomly.

Pair Corralation between GlaxoSmithKline PLC and Us Defensive

Considering the 90-day investment horizon GlaxoSmithKline PLC ADR is expected to under-perform the Us Defensive. In addition to that, GlaxoSmithKline PLC is 1.86 times more volatile than Us Defensive Equity. It trades about -0.23 of its total potential returns per unit of risk. Us Defensive Equity is currently generating about 0.33 per unit of volatility. If you would invest  4,952  in Us Defensive Equity on September 1, 2024 and sell it today you would earn a total of  253.00  from holding Us Defensive Equity or generate 5.11% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Significant
Accuracy	95.45%
Values	Daily Returns

GlaxoSmithKline PLC ADR  vs.  Us Defensive Equity

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.

Us Defensive Equity

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Us Defensive Equity are ranked lower than 12 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak basic indicators, Us Defensive may actually be approaching a critical reversion point that can send shares even higher in December 2024.

Pair Trading with GlaxoSmithKline PLC and Us Defensive

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

The idea behind GlaxoSmithKline PLC ADR and Us Defensive Equity 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.