Correlation Between GlaxoSmithKline PLC and TechnipFMC PLC

Can any of the company-specific risk be diversified away by investing in both GlaxoSmithKline PLC and TechnipFMC PLC 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 TechnipFMC PLC 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 TechnipFMC PLC, you can compare the effects of market volatilities on GlaxoSmithKline PLC and TechnipFMC PLC 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 TechnipFMC PLC. Check out your portfolio center. Please also check ongoing floating volatility patterns of GlaxoSmithKline PLC and TechnipFMC PLC.

Diversification Opportunities for GlaxoSmithKline PLC and TechnipFMC PLC

-0.81

Correlation Coefficient

GlaxoSmithKline PLC  TechnipFMC PLC

Pay attention - limited upside

The 3 months correlation between GlaxoSmithKline and TechnipFMC is -0.81. Overlapping area represents the amount of risk that can be diversified away by holding GlaxoSmithKline PLC ADR and TechnipFMC PLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on TechnipFMC 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 TechnipFMC PLC. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of TechnipFMC PLC has no effect on the direction of GlaxoSmithKline PLC i.e., GlaxoSmithKline PLC and TechnipFMC PLC go up and down completely randomly.

Pair Corralation between GlaxoSmithKline PLC and TechnipFMC PLC

Considering the 90-day investment horizon GlaxoSmithKline PLC ADR is expected to under-perform the TechnipFMC PLC. But the stock apears to be less risky and, when comparing its historical volatility, GlaxoSmithKline PLC ADR is 1.37 times less risky than TechnipFMC PLC. The stock trades about -0.27 of its potential returns per unit of risk. The TechnipFMC PLC is currently generating about 0.48 of returns per unit of risk over similar time horizon. If you would invest  2,402  in TechnipFMC PLC on August 29, 2024 and sell it today you would earn a total of  511.00  from holding TechnipFMC PLC or generate 21.27% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Significant
Accuracy	95.65%
Values	Daily Returns

GlaxoSmithKline PLC ADR  vs.  TechnipFMC PLC

GlaxoSmithKline PLC ADR

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days GlaxoSmithKline PLC ADR has generated negative risk-adjusted returns adding no value to investors with long positions. Despite uncertain performance in the last few months, the Stock's basic indicators remain quite persistent which may send shares a bit higher in December 2024. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

TechnipFMC PLC

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in TechnipFMC PLC are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, TechnipFMC PLC unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with GlaxoSmithKline PLC and TechnipFMC PLC

The main advantage of trading using opposite GlaxoSmithKline PLC and TechnipFMC PLC positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GlaxoSmithKline PLC position performs unexpectedly, TechnipFMC PLC 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 TechnipFMC PLC will offset losses from the drop in TechnipFMC PLC's long position.

The idea behind GlaxoSmithKline PLC ADR and TechnipFMC PLC pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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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 Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.