Correlation Between Butterfly Network and GSK Plc

Can any of the company-specific risk be diversified away by investing in both Butterfly Network and GSK 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 Butterfly Network and GSK Plc into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Butterfly Network and GSK plc, you can compare the effects of market volatilities on Butterfly Network and GSK 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 Butterfly Network with a short position of GSK Plc. Check out your portfolio center. Please also check ongoing floating volatility patterns of Butterfly Network and GSK Plc.

Diversification Opportunities for Butterfly Network and GSK Plc

0.33

Correlation Coefficient

Butterfly Network  GSK Plc

Weak diversification

The 3 months correlation between Butterfly and GSK is 0.33. Overlapping area represents the amount of risk that can be diversified away by holding Butterfly Network and GSK plc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on GSK plc and Butterfly Network 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 Butterfly Network are associated (or correlated) with GSK Plc. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of GSK plc has no effect on the direction of Butterfly Network i.e., Butterfly Network and GSK Plc go up and down completely randomly.

Pair Corralation between Butterfly Network and GSK Plc

Given the investment horizon of 90 days Butterfly Network is expected to generate 2.11 times less return on investment than GSK Plc. In addition to that, Butterfly Network is 2.67 times more volatile than GSK plc. It trades about 0.01 of its total potential returns per unit of risk. GSK plc is currently generating about 0.08 per unit of volatility. If you would invest  1,698  in GSK plc on December 5, 2024 and sell it today you would earn a total of  186.00  from holding GSK plc or generate 10.95% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

Butterfly Network  vs.  GSK plc

Butterfly Network

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Butterfly Network are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak essential indicators, Butterfly Network may actually be approaching a critical reversion point that can send shares even higher in April 2025.

GSK plc

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in GSK plc are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, GSK Plc reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Butterfly Network and GSK Plc

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

The idea behind Butterfly Network and GSK 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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.