Correlation Between Ford and GlaxoSmithKline PLC
Can any of the company-specific risk be diversified away by investing in both Ford 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 Ford and GlaxoSmithKline PLC into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Ford Motor and GlaxoSmithKline PLC ADR, you can compare the effects of market volatilities on Ford 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 Ford with a short position of GlaxoSmithKline PLC. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ford and GlaxoSmithKline PLC.
Diversification Opportunities for Ford and GlaxoSmithKline PLC
-0.22 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Ford and GlaxoSmithKline is -0.22. Overlapping area represents the amount of risk that can be diversified away by holding Ford Motor 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 Ford 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 Ford Motor 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 Ford i.e., Ford and GlaxoSmithKline PLC go up and down completely randomly.
Pair Corralation between Ford and GlaxoSmithKline PLC
Taking into account the 90-day investment horizon Ford Motor is expected to generate 1.6 times more return on investment than GlaxoSmithKline PLC. However, Ford is 1.6 times more volatile than GlaxoSmithKline PLC ADR. It trades about 0.0 of its potential returns per unit of risk. GlaxoSmithKline PLC ADR is currently generating about -0.12 per unit of risk. If you would invest 1,135 in Ford Motor on August 24, 2024 and sell it today you would lose (55.00) from holding Ford Motor or give up 4.85% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Ford Motor vs. GlaxoSmithKline PLC ADR
Performance |
| Timeline |
| Ford Motor |
| GlaxoSmithKline PLC ADR |
Ford and GlaxoSmithKline PLC Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Ford and GlaxoSmithKline PLC
The main advantage of trading using opposite Ford and GlaxoSmithKline PLC positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ford 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 Ford Motor 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.| GlaxoSmithKline PLC vs. Novartis AG ADR | GlaxoSmithKline PLC vs. AstraZeneca PLC ADR | GlaxoSmithKline PLC vs. Roche Holding Ltd | GlaxoSmithKline PLC vs. Bristol Myers Squibb |
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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.
Other Complementary Tools
| Money Managers Screen money managers from public funds and ETFs managed around the world | |
| Money Flow Index Determine momentum by analyzing Money Flow Index and other technical indicators | |
| Earnings Calls Check upcoming earnings announcements updated hourly across public exchanges | |
| Aroon Oscillator Analyze current equity momentum using Aroon Oscillator and other momentum ratios | |
| Technical Analysis Check basic technical indicators and analysis based on most latest market data |