Correlation Between GlaxoSmithKline PLC and Dreyfus Natural
Can any of the company-specific risk be diversified away by investing in both GlaxoSmithKline PLC and Dreyfus Natural 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 Dreyfus Natural 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 Dreyfus Natural Resources, you can compare the effects of market volatilities on GlaxoSmithKline PLC and Dreyfus Natural 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 Dreyfus Natural. Check out your portfolio center. Please also check ongoing floating volatility patterns of GlaxoSmithKline PLC and Dreyfus Natural.
Diversification Opportunities for GlaxoSmithKline PLC and Dreyfus Natural
-0.67 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between GlaxoSmithKline and Dreyfus is -0.67. Overlapping area represents the amount of risk that can be diversified away by holding GlaxoSmithKline PLC ADR and Dreyfus Natural Resources in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dreyfus Natural Resources 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 Dreyfus Natural. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dreyfus Natural Resources has no effect on the direction of GlaxoSmithKline PLC i.e., GlaxoSmithKline PLC and Dreyfus Natural go up and down completely randomly.
Pair Corralation between GlaxoSmithKline PLC and Dreyfus Natural
Considering the 90-day investment horizon GlaxoSmithKline PLC ADR is expected to generate 0.92 times more return on investment than Dreyfus Natural. However, GlaxoSmithKline PLC ADR is 1.09 times less risky than Dreyfus Natural. It trades about 0.02 of its potential returns per unit of risk. Dreyfus Natural Resources is currently generating about 0.01 per unit of risk. If you would invest 3,229 in GlaxoSmithKline PLC ADR on August 28, 2024 and sell it today you would earn a total of 186.00 from holding GlaxoSmithKline PLC ADR or generate 5.76% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
GlaxoSmithKline PLC ADR vs. Dreyfus Natural Resources
Performance |
| Timeline |
| GlaxoSmithKline PLC ADR |
| Dreyfus Natural Resources |
GlaxoSmithKline PLC and Dreyfus Natural Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with GlaxoSmithKline PLC and Dreyfus Natural
The main advantage of trading using opposite GlaxoSmithKline PLC and Dreyfus Natural positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GlaxoSmithKline PLC position performs unexpectedly, Dreyfus Natural 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 Dreyfus Natural will offset losses from the drop in Dreyfus Natural's long position.| GlaxoSmithKline PLC vs. Novartis AG ADR | GlaxoSmithKline PLC vs. AstraZeneca PLC ADR | GlaxoSmithKline PLC vs. Roche Holding Ltd | GlaxoSmithKline PLC vs. Bristol Myers Squibb |
| Dreyfus Natural vs. Gabelli Global Financial | Dreyfus Natural vs. Fidelity Advisor Financial | Dreyfus Natural vs. Blackrock Financial Institutions | Dreyfus Natural vs. Vanguard Financials Index |
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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.
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