Correlation Between GlaxoSmithKline PLC and Franco Nevada
Can any of the company-specific risk be diversified away by investing in both GlaxoSmithKline PLC and Franco Nevada 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 Franco Nevada 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 Franco Nevada, you can compare the effects of market volatilities on GlaxoSmithKline PLC and Franco Nevada 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 Franco Nevada. Check out your portfolio center. Please also check ongoing floating volatility patterns of GlaxoSmithKline PLC and Franco Nevada.
Diversification Opportunities for GlaxoSmithKline PLC and Franco Nevada
-0.05 | Correlation Coefficient |
Good diversification
The 3 months correlation between GlaxoSmithKline and Franco is -0.05. Overlapping area represents the amount of risk that can be diversified away by holding GlaxoSmithKline PLC ADR and Franco Nevada in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Franco Nevada 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 Franco Nevada. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Franco Nevada has no effect on the direction of GlaxoSmithKline PLC i.e., GlaxoSmithKline PLC and Franco Nevada go up and down completely randomly.
Pair Corralation between GlaxoSmithKline PLC and Franco Nevada
Considering the 90-day investment horizon GlaxoSmithKline PLC ADR is expected to under-perform the Franco Nevada. But the stock apears to be less risky and, when comparing its historical volatility, GlaxoSmithKline PLC ADR is 1.14 times less risky than Franco Nevada. The stock trades about -0.23 of its potential returns per unit of risk. The Franco Nevada is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest 11,870 in Franco Nevada on August 31, 2024 and sell it today you would earn a total of 426.00 from holding Franco Nevada or generate 3.59% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
GlaxoSmithKline PLC ADR vs. Franco Nevada
Performance |
| Timeline |
| GlaxoSmithKline PLC ADR |
| Franco Nevada |
GlaxoSmithKline PLC and Franco Nevada Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with GlaxoSmithKline PLC and Franco Nevada
The main advantage of trading using opposite GlaxoSmithKline PLC and Franco Nevada positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GlaxoSmithKline PLC position performs unexpectedly, Franco Nevada 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 Franco Nevada will offset losses from the drop in Franco Nevada'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 |
| Franco Nevada vs. Royal Gold | Franco Nevada vs. Agnico Eagle Mines | Franco Nevada vs. Pan American Silver | Franco Nevada vs. Sandstorm Gold Ltd |
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 Portfolio Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.
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