Correlation Between GlaxoSmithKline PLC and KFA Mount
Can any of the company-specific risk be diversified away by investing in both GlaxoSmithKline PLC and KFA Mount 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 KFA Mount 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 KFA Mount Lucas, you can compare the effects of market volatilities on GlaxoSmithKline PLC and KFA Mount 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 KFA Mount. Check out your portfolio center. Please also check ongoing floating volatility patterns of GlaxoSmithKline PLC and KFA Mount.
Diversification Opportunities for GlaxoSmithKline PLC and KFA Mount
0.85 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between GlaxoSmithKline and KFA is 0.85. Overlapping area represents the amount of risk that can be diversified away by holding GlaxoSmithKline PLC ADR and KFA Mount Lucas in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on KFA Mount Lucas 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 KFA Mount. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of KFA Mount Lucas has no effect on the direction of GlaxoSmithKline PLC i.e., GlaxoSmithKline PLC and KFA Mount go up and down completely randomly.
Pair Corralation between GlaxoSmithKline PLC and KFA Mount
Considering the 90-day investment horizon GlaxoSmithKline PLC ADR is expected to under-perform the KFA Mount. In addition to that, GlaxoSmithKline PLC is 2.56 times more volatile than KFA Mount Lucas. It trades about -0.27 of its total potential returns per unit of risk. KFA Mount Lucas is currently generating about -0.19 per unit of volatility. If you would invest 2,838 in KFA Mount Lucas on August 29, 2024 and sell it today you would lose (65.00) from holding KFA Mount Lucas or give up 2.29% 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. KFA Mount Lucas
Performance |
| Timeline |
| GlaxoSmithKline PLC ADR |
| KFA Mount Lucas |
GlaxoSmithKline PLC and KFA Mount Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with GlaxoSmithKline PLC and KFA Mount
The main advantage of trading using opposite GlaxoSmithKline PLC and KFA Mount positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GlaxoSmithKline PLC position performs unexpectedly, KFA Mount 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 KFA Mount will offset losses from the drop in KFA Mount'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 |
| KFA Mount vs. iMGP DBi Managed | KFA Mount vs. Simplify Exchange Traded | KFA Mount vs. Simplify Interest Rate | KFA Mount vs. AGFiQ Market Neutral |
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 Sync Your Broker module to sync your existing holdings, watchlists, positions or portfolios from thousands of online brokerage services, banks, investment account aggregators and robo-advisors..
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