Correlation Between GlaxoSmithKline PLC and First Trust
Can any of the company-specific risk be diversified away by investing in both GlaxoSmithKline PLC and First Trust 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 Trust 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 Trust Preferred, you can compare the effects of market volatilities on GlaxoSmithKline PLC and First Trust 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 Trust. Check out your portfolio center. Please also check ongoing floating volatility patterns of GlaxoSmithKline PLC and First Trust.
Diversification Opportunities for GlaxoSmithKline PLC and First Trust
-0.49 | Correlation Coefficient |
Very good diversification
The 3 months correlation between GlaxoSmithKline and First is -0.49. Overlapping area represents the amount of risk that can be diversified away by holding GlaxoSmithKline PLC ADR and First Trust Preferred in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on First Trust Preferred 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 Trust. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of First Trust Preferred has no effect on the direction of GlaxoSmithKline PLC i.e., GlaxoSmithKline PLC and First Trust go up and down completely randomly.
Pair Corralation between GlaxoSmithKline PLC and First Trust
Considering the 90-day investment horizon GlaxoSmithKline PLC ADR is expected to under-perform the First Trust. In addition to that, GlaxoSmithKline PLC is 4.9 times more volatile than First Trust Preferred. It trades about -0.31 of its total potential returns per unit of risk. First Trust Preferred is currently generating about -0.12 per unit of volatility. If you would invest 1,798 in First Trust Preferred on August 29, 2024 and sell it today you would lose (13.00) from holding First Trust Preferred or give up 0.72% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
GlaxoSmithKline PLC ADR vs. First Trust Preferred
Performance |
| Timeline |
| GlaxoSmithKline PLC ADR |
| First Trust Preferred |
GlaxoSmithKline PLC and First Trust Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with GlaxoSmithKline PLC and First Trust
The main advantage of trading using opposite GlaxoSmithKline PLC and First Trust positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GlaxoSmithKline PLC position performs unexpectedly, First Trust 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 Trust will offset losses from the drop in First Trust'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 Trust vs. Invesco Variable Rate | First Trust vs. VanEck Preferred Securities | First Trust vs. First Trust Tactical | First Trust vs. First Trust Senior |
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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.
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