Correlation Between GlaxoSmithKline PLC and Sibanye Gold
Can any of the company-specific risk be diversified away by investing in both GlaxoSmithKline PLC and Sibanye 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 Sibanye 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 Sibanye Gold Ltd, you can compare the effects of market volatilities on GlaxoSmithKline PLC and Sibanye 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 Sibanye Gold. Check out your portfolio center. Please also check ongoing floating volatility patterns of GlaxoSmithKline PLC and Sibanye Gold.
Diversification Opportunities for GlaxoSmithKline PLC and Sibanye Gold
-0.44 | Correlation Coefficient |
Very good diversification
The 3 months correlation between GlaxoSmithKline and Sibanye is -0.44. Overlapping area represents the amount of risk that can be diversified away by holding GlaxoSmithKline PLC ADR and Sibanye Gold Ltd in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sibanye 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 Sibanye Gold. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sibanye Gold has no effect on the direction of GlaxoSmithKline PLC i.e., GlaxoSmithKline PLC and Sibanye Gold go up and down completely randomly.
Pair Corralation between GlaxoSmithKline PLC and Sibanye Gold
Considering the 90-day investment horizon GlaxoSmithKline PLC ADR is expected to generate 0.35 times more return on investment than Sibanye Gold. However, GlaxoSmithKline PLC ADR is 2.88 times less risky than Sibanye Gold. It trades about -0.23 of its potential returns per unit of risk. Sibanye Gold Ltd is currently generating about -0.23 per unit of risk. If you would invest 3,659 in GlaxoSmithKline PLC ADR on August 31, 2024 and sell it today you would lose (226.00) from holding GlaxoSmithKline PLC ADR or give up 6.18% 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. Sibanye Gold Ltd
Performance |
| Timeline |
| GlaxoSmithKline PLC ADR |
| Sibanye Gold |
GlaxoSmithKline PLC and Sibanye Gold Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with GlaxoSmithKline PLC and Sibanye Gold
The main advantage of trading using opposite GlaxoSmithKline PLC and Sibanye Gold positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GlaxoSmithKline PLC position performs unexpectedly, Sibanye 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 Sibanye Gold will offset losses from the drop in Sibanye 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 |
| Sibanye Gold vs. Franco Nevada | Sibanye Gold vs. Alamos Gold | Sibanye Gold vs. Seabridge Gold | Sibanye Gold vs. Osisko Gold Ro |
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 Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.
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