Correlation Between GlaxoSmithKline PLC and Federal Home
Can any of the company-specific risk be diversified away by investing in both GlaxoSmithKline PLC and Federal Home 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 Federal Home 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 Federal Home Loan, you can compare the effects of market volatilities on GlaxoSmithKline PLC and Federal Home 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 Federal Home. Check out your portfolio center. Please also check ongoing floating volatility patterns of GlaxoSmithKline PLC and Federal Home.
Diversification Opportunities for GlaxoSmithKline PLC and Federal Home
-0.8 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between GlaxoSmithKline and Federal is -0.8. Overlapping area represents the amount of risk that can be diversified away by holding GlaxoSmithKline PLC ADR and Federal Home Loan in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Federal Home Loan 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 Federal Home. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Federal Home Loan has no effect on the direction of GlaxoSmithKline PLC i.e., GlaxoSmithKline PLC and Federal Home go up and down completely randomly.
Pair Corralation between GlaxoSmithKline PLC and Federal Home
Considering the 90-day investment horizon GlaxoSmithKline PLC ADR is expected to under-perform the Federal Home. But the stock apears to be less risky and, when comparing its historical volatility, GlaxoSmithKline PLC ADR is 14.26 times less risky than Federal Home. The stock trades about -0.23 of its potential returns per unit of risk. The Federal Home Loan is currently generating about 0.3 of returns per unit of risk over similar time horizon. If you would invest 634.00 in Federal Home Loan on September 1, 2024 and sell it today you would earn a total of 956.00 from holding Federal Home Loan or generate 150.79% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
GlaxoSmithKline PLC ADR vs. Federal Home Loan
Performance |
| Timeline |
| GlaxoSmithKline PLC ADR |
| Federal Home Loan |
GlaxoSmithKline PLC and Federal Home Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with GlaxoSmithKline PLC and Federal Home
The main advantage of trading using opposite GlaxoSmithKline PLC and Federal Home positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GlaxoSmithKline PLC position performs unexpectedly, Federal Home 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 Federal Home will offset losses from the drop in Federal Home'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 |
| Federal Home vs. Federal National Mortgage | Federal Home vs. HUMANA INC | Federal Home vs. SCOR PK | Federal Home vs. Aquagold International |
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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.
Other Complementary Tools
| Money Flow Index Determine momentum by analyzing Money Flow Index and other technical indicators | |
| Price Ceiling Movement Calculate and plot Price Ceiling Movement for different equity instruments | |
| Portfolio Backtesting Avoid under-diversification and over-optimization by backtesting your portfolios | |
| Insider Screener Find insiders across different sectors to evaluate their impact on performance | |
| Equity Forecasting Use basic forecasting models to generate price predictions and determine price momentum |