Correlation Between GlaxoSmithKline PLC and Lundin Gold
Can any of the company-specific risk be diversified away by investing in both GlaxoSmithKline PLC and Lundin Gold 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 Lundin Gold 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 Lundin Gold, you can compare the effects of market volatilities on GlaxoSmithKline PLC and Lundin Gold 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 Lundin Gold. Check out your portfolio center. Please also check ongoing floating volatility patterns of GlaxoSmithKline PLC and Lundin Gold.
Diversification Opportunities for GlaxoSmithKline PLC and Lundin Gold
-0.77 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between GlaxoSmithKline and Lundin is -0.77. Overlapping area represents the amount of risk that can be diversified away by holding GlaxoSmithKline PLC ADR and Lundin Gold in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lundin Gold 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 Lundin Gold. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lundin Gold has no effect on the direction of GlaxoSmithKline PLC i.e., GlaxoSmithKline PLC and Lundin Gold go up and down completely randomly.
Pair Corralation between GlaxoSmithKline PLC and Lundin Gold
Considering the 90-day investment horizon GlaxoSmithKline PLC ADR is expected to under-perform the Lundin Gold. But the stock apears to be less risky and, when comparing its historical volatility, GlaxoSmithKline PLC ADR is 2.26 times less risky than Lundin Gold. The stock trades about -0.23 of its potential returns per unit of risk. The Lundin Gold is currently generating about -0.02 of returns per unit of risk over similar time horizon. If you would invest 25,600 in Lundin Gold on September 1, 2024 and sell it today you would lose (500.00) from holding Lundin Gold or give up 1.95% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 91.3% |
| Values | Daily Returns |
GlaxoSmithKline PLC ADR vs. Lundin Gold
Performance |
| Timeline |
| GlaxoSmithKline PLC ADR |
| Lundin Gold |
GlaxoSmithKline PLC and Lundin Gold Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with GlaxoSmithKline PLC and Lundin Gold
The main advantage of trading using opposite GlaxoSmithKline PLC and Lundin Gold positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GlaxoSmithKline PLC position performs unexpectedly, Lundin Gold 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 Lundin Gold will offset losses from the drop in Lundin Gold'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 |
| Lundin Gold vs. Lundin Mining | Lundin Gold vs. Africa Oil Corp | Lundin Gold vs. International Petroleum | Lundin Gold vs. Boliden AB |
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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.
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