Correlation Between GlaxoSmithKline PLC and BMO Long
Can any of the company-specific risk be diversified away by investing in both GlaxoSmithKline PLC and BMO Long 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 BMO Long 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 BMO Long Provincial, you can compare the effects of market volatilities on GlaxoSmithKline PLC and BMO Long 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 BMO Long. Check out your portfolio center. Please also check ongoing floating volatility patterns of GlaxoSmithKline PLC and BMO Long.
Diversification Opportunities for GlaxoSmithKline PLC and BMO Long
0.35 | Correlation Coefficient |
Weak diversification
The 3 months correlation between GlaxoSmithKline and BMO is 0.35. Overlapping area represents the amount of risk that can be diversified away by holding GlaxoSmithKline PLC ADR and BMO Long Provincial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BMO Long Provincial 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 BMO Long. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BMO Long Provincial has no effect on the direction of GlaxoSmithKline PLC i.e., GlaxoSmithKline PLC and BMO Long go up and down completely randomly.
Pair Corralation between GlaxoSmithKline PLC and BMO Long
Considering the 90-day investment horizon GlaxoSmithKline PLC ADR is expected to under-perform the BMO Long. In addition to that, GlaxoSmithKline PLC is 1.46 times more volatile than BMO Long Provincial. It trades about -0.23 of its total potential returns per unit of risk. BMO Long Provincial is currently generating about 0.19 per unit of volatility. If you would invest 1,253 in BMO Long Provincial on September 1, 2024 and sell it today you would earn a total of 47.00 from holding BMO Long Provincial or generate 3.75% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 91.3% |
| Values | Daily Returns |
GlaxoSmithKline PLC ADR vs. BMO Long Provincial
Performance |
| Timeline |
| GlaxoSmithKline PLC ADR |
| BMO Long Provincial |
GlaxoSmithKline PLC and BMO Long Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with GlaxoSmithKline PLC and BMO Long
The main advantage of trading using opposite GlaxoSmithKline PLC and BMO Long positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GlaxoSmithKline PLC position performs unexpectedly, BMO Long 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 BMO Long will offset losses from the drop in BMO Long'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 |
| BMO Long vs. BMO Long Corporate | BMO Long vs. BMO Short Provincial | BMO Long vs. BMO Mid Provincial | BMO Long vs. BMO Mid Corporate |
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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.
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