Correlation Between GLAXOSMITHKLINE PLC and MITIE GROUP

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

Diversification Opportunities for GLAXOSMITHKLINE PLC and MITIE GROUP

0.37
  Correlation Coefficient

Weak diversification

The 3 months correlation between GLAXOSMITHKLINE and MITIE is 0.37. Overlapping area represents the amount of risk that can be diversified away by holding GLAXOSMITHKLINE PLC ORD 25P and MITIE GROUP PLC ORD 2 5P in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on MITIE GROUP PLC 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 ORD are associated (or correlated) with MITIE GROUP. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of MITIE GROUP PLC has no effect on the direction of GLAXOSMITHKLINE PLC i.e., GLAXOSMITHKLINE PLC and MITIE GROUP go up and down completely randomly.

Pair Corralation between GLAXOSMITHKLINE PLC and MITIE GROUP

Assuming the 90 days horizon GLAXOSMITHKLINE PLC is expected to generate 2.7 times less return on investment than MITIE GROUP. But when comparing it to its historical volatility, GLAXOSMITHKLINE PLC ORD is 1.31 times less risky than MITIE GROUP. It trades about 0.1 of its potential returns per unit of risk. MITIE GROUP PLC is currently generating about 0.21 of returns per unit of risk over similar time horizon. If you would invest  6,260  in MITIE GROUP PLC on August 31, 2022 and sell it today you would earn a total of  1,260  from holding MITIE GROUP PLC or generate 20.13% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthVery Weak
Accuracy100.0%
ValuesDaily Returns

GLAXOSMITHKLINE PLC ORD 25P  vs.  MITIE GROUP PLC ORD 2 5P

 Performance (%) 
       Timeline  
GLAXOSMITHKLINE PLC ORD 
GLAXOSMITHKLINE Performance
1 of 100
Compared to the overall equity markets, risk-adjusted returns on investments in GLAXOSMITHKLINE PLC ORD are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Even with relatively steady basic indicators, GLAXOSMITHKLINE PLC is not utilizing all of its potentials. The new stock price chaos, may contribute to medium-term losses for the stakeholders.

GLAXOSMITHKLINE Price Channel

MITIE GROUP PLC 
MITIE Performance
2 of 100
Compared to the overall equity markets, risk-adjusted returns on investments in MITIE GROUP PLC are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Even with relatively steady basic indicators, MITIE GROUP is not utilizing all of its potentials. The new stock price chaos, may contribute to medium-term losses for the stakeholders.

MITIE Price Channel

GLAXOSMITHKLINE PLC and MITIE GROUP Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with GLAXOSMITHKLINE PLC and MITIE GROUP

The main advantage of trading using opposite GLAXOSMITHKLINE PLC and MITIE GROUP positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GLAXOSMITHKLINE PLC position performs unexpectedly, MITIE GROUP 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 MITIE GROUP will offset losses from the drop in MITIE GROUP's long position.
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The idea behind GLAXOSMITHKLINE PLC ORD and MITIE GROUP PLC 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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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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.

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