Correlation Between Global Net and Diageo PLC
Can any of the company-specific risk be diversified away by investing in both Global Net and Diageo 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 Global Net and Diageo PLC into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Global Net Lease and Diageo PLC, you can compare the effects of market volatilities on Global Net and Diageo 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 Global Net with a short position of Diageo PLC. Check out your portfolio center. Please also check ongoing floating volatility patterns of Global Net and Diageo PLC.
Diversification Opportunities for Global Net and Diageo PLC
0.7 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Global and Diageo is 0.7. Overlapping area represents the amount of risk that can be diversified away by holding Global Net Lease and Diageo PLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Diageo PLC and Global Net 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 Global Net Lease are associated (or correlated) with Diageo PLC. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Diageo PLC has no effect on the direction of Global Net i.e., Global Net and Diageo PLC go up and down completely randomly.
Pair Corralation between Global Net and Diageo PLC
Assuming the 90 days trading horizon Global Net Lease is expected to generate 2.03 times more return on investment than Diageo PLC. However, Global Net is 2.03 times more volatile than Diageo PLC. It trades about -0.01 of its potential returns per unit of risk. Diageo PLC is currently generating about -0.05 per unit of risk. If you would invest 916.00 in Global Net Lease on September 12, 2024 and sell it today you would lose (192.00) from holding Global Net Lease or give up 20.96% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 99.44% |
| Values | Daily Returns |
Global Net Lease vs. Diageo PLC
Performance |
| Timeline |
| Global Net Lease |
| Diageo PLC |
Global Net and Diageo PLC Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Global Net and Diageo PLC
The main advantage of trading using opposite Global Net and Diageo PLC positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Global Net position performs unexpectedly, Diageo 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 Diageo PLC will offset losses from the drop in Diageo PLC's long position.| Global Net vs. Hong Kong Land | Global Net vs. Neometals | Global Net vs. Coor Service Management | Global Net vs. Fidelity Sustainable USD |
| Diageo PLC vs. Global Net Lease | Diageo PLC vs. United States Steel | Diageo PLC vs. Telecom Italia SpA | Diageo PLC vs. Symphony Environmental Technologies |
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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.
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