Correlation Between Twitter and GlaxoSmithKline PLC

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Can any of the company-specific risk be diversified away by investing in both Twitter and GlaxoSmithKline PLC 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 Twitter and GlaxoSmithKline PLC into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Twitter and GlaxoSmithKline PLC ADR, you can compare the effects of market volatilities on Twitter and GlaxoSmithKline PLC 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 Twitter with a short position of GlaxoSmithKline PLC. Check out your portfolio center. Please also check ongoing floating volatility patterns of Twitter and GlaxoSmithKline PLC.

Diversification Opportunities for Twitter and GlaxoSmithKline PLC

0.63
  Correlation Coefficient

Poor diversification

The 3 months correlation between Twitter and GlaxoSmithKline is 0.63. Overlapping area represents the amount of risk that can be diversified away by holding Twitter and GlaxoSmithKline PLC ADR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on GlaxoSmithKline PLC ADR and Twitter 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 Twitter are associated (or correlated) with GlaxoSmithKline PLC. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of GlaxoSmithKline PLC ADR has no effect on the direction of Twitter i.e., Twitter and GlaxoSmithKline PLC go up and down completely randomly.

Pair Corralation between Twitter and GlaxoSmithKline PLC

If you would invest  4,234  in GlaxoSmithKline PLC ADR on December 30, 2023 and sell it today you would earn a total of  53.00  from holding GlaxoSmithKline PLC ADR or generate 1.25% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthSignificant
Accuracy4.55%
ValuesDaily Returns

Twitter  vs.  GlaxoSmithKline PLC ADR

 Performance 
       Timeline  
Twitter 

Risk-Adjusted Performance

0 of 100

 
Low
 
High
Very Weak
Over the last 90 days Twitter has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable basic indicators, Twitter is not utilizing all of its potentials. The current stock price agitation, may contribute to short-term losses for the retail investors.
GlaxoSmithKline PLC ADR 

Risk-Adjusted Performance

18 of 100

 
Low
 
High
Solid
Compared to the overall equity markets, risk-adjusted returns on investments in GlaxoSmithKline PLC ADR are ranked lower than 18 (%) of all global equities and portfolios over the last 90 days. Despite quite weak basic indicators, GlaxoSmithKline PLC disclosed solid returns over the last few months and may actually be approaching a breakup point.

Twitter and GlaxoSmithKline PLC Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Twitter and GlaxoSmithKline PLC

The main advantage of trading using opposite Twitter and GlaxoSmithKline PLC positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Twitter position performs unexpectedly, GlaxoSmithKline PLC 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 GlaxoSmithKline PLC will offset losses from the drop in GlaxoSmithKline PLC's long position.
The idea behind Twitter and GlaxoSmithKline PLC ADR 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 Portfolio Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.

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