Correlation Between GlaxoSmithKline PLC and Premier Foods
Can any of the company-specific risk be diversified away by investing in both GlaxoSmithKline PLC and Premier Foods 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 Premier Foods 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 Premier Foods PLC, you can compare the effects of market volatilities on GlaxoSmithKline PLC and Premier Foods 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 Premier Foods. Check out your portfolio center. Please also check ongoing floating volatility patterns of GlaxoSmithKline PLC and Premier Foods.
Diversification Opportunities for GlaxoSmithKline PLC and Premier Foods
-0.62 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between GlaxoSmithKline and Premier is -0.62. Overlapping area represents the amount of risk that can be diversified away by holding GlaxoSmithKline PLC ADR and Premier Foods PLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Premier Foods PLC 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 Premier Foods. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Premier Foods PLC has no effect on the direction of GlaxoSmithKline PLC i.e., GlaxoSmithKline PLC and Premier Foods go up and down completely randomly.
Pair Corralation between GlaxoSmithKline PLC and Premier Foods
Considering the 90-day investment horizon GlaxoSmithKline PLC is expected to generate 16.93 times less return on investment than Premier Foods. But when comparing it to its historical volatility, GlaxoSmithKline PLC ADR is 1.07 times less risky than Premier Foods. It trades about 0.01 of its potential returns per unit of risk. Premier Foods PLC is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest 10,470 in Premier Foods PLC on August 28, 2024 and sell it today you would earn a total of 8,370 from holding Premier Foods PLC or generate 79.94% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 99.6% |
| Values | Daily Returns |
GlaxoSmithKline PLC ADR vs. Premier Foods PLC
Performance |
| Timeline |
| GlaxoSmithKline PLC ADR |
| Premier Foods PLC |
GlaxoSmithKline PLC and Premier Foods Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with GlaxoSmithKline PLC and Premier Foods
The main advantage of trading using opposite GlaxoSmithKline PLC and Premier Foods positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GlaxoSmithKline PLC position performs unexpectedly, Premier Foods 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 Premier Foods will offset losses from the drop in Premier Foods' 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 |
| Premier Foods vs. Walmart | Premier Foods vs. BYD Co | Premier Foods vs. Volkswagen AG Non Vtg | Premier Foods vs. Deutsche Post AG |
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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.
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