Correlation Between GlaxoSmithKline PLC and Johnson Johnson
Can any of the company-specific risk be diversified away by investing in both GlaxoSmithKline PLC and Johnson Johnson 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 Johnson Johnson 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 Johnson Johnson, you can compare the effects of market volatilities on GlaxoSmithKline PLC and Johnson Johnson 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 Johnson Johnson. Check out your portfolio center. Please also check ongoing floating volatility patterns of GlaxoSmithKline PLC and Johnson Johnson.
Diversification Opportunities for GlaxoSmithKline PLC and Johnson Johnson
0.41 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between GlaxoSmithKline and Johnson is 0.41. Overlapping area represents the amount of risk that can be diversified away by holding GlaxoSmithKline PLC ADR and Johnson Johnson in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Johnson Johnson 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 Johnson Johnson. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Johnson Johnson has no effect on the direction of GlaxoSmithKline PLC i.e., GlaxoSmithKline PLC and Johnson Johnson go up and down completely randomly.
Pair Corralation between GlaxoSmithKline PLC and Johnson Johnson
Considering the 90-day investment horizon GlaxoSmithKline PLC ADR is expected to generate 1.21 times more return on investment than Johnson Johnson. However, GlaxoSmithKline PLC is 1.21 times more volatile than Johnson Johnson. It trades about 0.16 of its potential returns per unit of risk. Johnson Johnson is currently generating about -0.01 per unit of risk. If you would invest 3,391 in GlaxoSmithKline PLC ADR on January 30, 2024 and sell it today you would earn a total of 720.00 from holding GlaxoSmithKline PLC ADR or generate 21.23% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Weak |
Accuracy | 99.19% |
Values | Daily Returns |
GlaxoSmithKline PLC ADR vs. Johnson Johnson
Performance |
Timeline |
GlaxoSmithKline PLC ADR |
Johnson Johnson |
GlaxoSmithKline PLC and Johnson Johnson Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with GlaxoSmithKline PLC and Johnson Johnson
The main advantage of trading using opposite GlaxoSmithKline PLC and Johnson Johnson positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GlaxoSmithKline PLC position performs unexpectedly, Johnson Johnson 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 Johnson Johnson will offset losses from the drop in Johnson Johnson's long position.GlaxoSmithKline PLC vs. Fidelity Freedom Blend | GlaxoSmithKline PLC vs. Income Fund Of | GlaxoSmithKline PLC vs. HP Inc | GlaxoSmithKline PLC vs. Chevron Corp |
Johnson Johnson vs. Fidelity Freedom Blend | Johnson Johnson vs. Income Fund Of | Johnson Johnson vs. HP Inc | Johnson Johnson vs. Chevron Corp |
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 Headlines Timeline module to stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity.
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