Correlation Between GlaxoSmithKline PLC and First Tractor
Can any of the company-specific risk be diversified away by investing in both GlaxoSmithKline PLC and First Tractor 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 First Tractor 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 First Tractor, you can compare the effects of market volatilities on GlaxoSmithKline PLC and First Tractor 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 First Tractor. Check out your portfolio center. Please also check ongoing floating volatility patterns of GlaxoSmithKline PLC and First Tractor.
Diversification Opportunities for GlaxoSmithKline PLC and First Tractor
0.0 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between GlaxoSmithKline and First is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding GlaxoSmithKline PLC ADR and First Tractor in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on First Tractor 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 First Tractor. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of First Tractor has no effect on the direction of GlaxoSmithKline PLC i.e., GlaxoSmithKline PLC and First Tractor go up and down completely randomly.
Pair Corralation between GlaxoSmithKline PLC and First Tractor
Considering the 90-day investment horizon GlaxoSmithKline PLC is expected to generate 6.96 times less return on investment than First Tractor. But when comparing it to its historical volatility, GlaxoSmithKline PLC ADR is 2.57 times less risky than First Tractor. It trades about 0.02 of its potential returns per unit of risk. First Tractor is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest 48.00 in First Tractor on August 31, 2024 and sell it today you would earn a total of 15.00 from holding First Tractor or generate 31.25% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Flat |
| Strength | Insignificant |
| Accuracy | 76.74% |
| Values | Daily Returns |
GlaxoSmithKline PLC ADR vs. First Tractor
Performance |
| Timeline |
| GlaxoSmithKline PLC ADR |
| First Tractor |
GlaxoSmithKline PLC and First Tractor Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with GlaxoSmithKline PLC and First Tractor
The main advantage of trading using opposite GlaxoSmithKline PLC and First Tractor positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GlaxoSmithKline PLC position performs unexpectedly, First Tractor 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 First Tractor will offset losses from the drop in First Tractor'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 |
| First Tractor vs. Ag Growth International | First Tractor vs. AmeraMex International | First Tractor vs. Arts Way Manufacturing Co | First Tractor vs. American Premium Water |
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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.
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