Correlation Between GlaxoSmithKline PLC and First Community
Can any of the company-specific risk be diversified away by investing in both GlaxoSmithKline PLC and First Community 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 Community 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 Community Financial, you can compare the effects of market volatilities on GlaxoSmithKline PLC and First Community 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 Community. Check out your portfolio center. Please also check ongoing floating volatility patterns of GlaxoSmithKline PLC and First Community.
Diversification Opportunities for GlaxoSmithKline PLC and First Community
0.86 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between GlaxoSmithKline and First is 0.86. Overlapping area represents the amount of risk that can be diversified away by holding GlaxoSmithKline PLC ADR and First Community Financial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on First Community Financial 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 Community. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of First Community Financial has no effect on the direction of GlaxoSmithKline PLC i.e., GlaxoSmithKline PLC and First Community go up and down completely randomly.
Pair Corralation between GlaxoSmithKline PLC and First Community
Considering the 90-day investment horizon GlaxoSmithKline PLC ADR is expected to generate 0.49 times more return on investment than First Community. However, GlaxoSmithKline PLC ADR is 2.03 times less risky than First Community. It trades about -0.27 of its potential returns per unit of risk. First Community Financial is currently generating about -0.15 per unit of risk. If you would invest 3,745 in GlaxoSmithKline PLC ADR on August 29, 2024 and sell it today you would lose (312.00) from holding GlaxoSmithKline PLC ADR or give up 8.33% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
GlaxoSmithKline PLC ADR vs. First Community Financial
Performance |
| Timeline |
| GlaxoSmithKline PLC ADR |
| First Community Financial |
GlaxoSmithKline PLC and First Community Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with GlaxoSmithKline PLC and First Community
The main advantage of trading using opposite GlaxoSmithKline PLC and First Community positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GlaxoSmithKline PLC position performs unexpectedly, First Community 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 Community will offset losses from the drop in First Community'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 Community vs. CCSB Financial Corp | First Community vs. Bank of Utica | First Community vs. BEO Bancorp | First Community vs. First Community |
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 Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.
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