Correlation Between Air Products and Diageo PLC
Can any of the company-specific risk be diversified away by investing in both Air Products 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 Air Products and Diageo PLC into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Air Products and and Diageo PLC ADR, you can compare the effects of market volatilities on Air Products 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 Air Products with a short position of Diageo PLC. Check out your portfolio center. Please also check ongoing floating volatility patterns of Air Products and Diageo PLC.
Diversification Opportunities for Air Products and Diageo PLC
-0.23 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Air and Diageo is -0.23. Overlapping area represents the amount of risk that can be diversified away by holding Air Products and and Diageo PLC ADR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Diageo PLC ADR and Air Products 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 Air Products and 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 ADR has no effect on the direction of Air Products i.e., Air Products and Diageo PLC go up and down completely randomly.
Pair Corralation between Air Products and Diageo PLC
Considering the 90-day investment horizon Air Products and is expected to generate 1.21 times more return on investment than Diageo PLC. However, Air Products is 1.21 times more volatile than Diageo PLC ADR. It trades about 0.13 of its potential returns per unit of risk. Diageo PLC ADR is currently generating about -0.04 per unit of risk. If you would invest 25,718 in Air Products and on August 28, 2024 and sell it today you would earn a total of 7,679 from holding Air Products and or generate 29.86% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Air Products and vs. Diageo PLC ADR
Performance |
| Timeline |
| Air Products |
| Diageo PLC ADR |
Air Products and Diageo PLC Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Air Products and Diageo PLC
The main advantage of trading using opposite Air Products and Diageo PLC positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Air Products 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.| Air Products vs. PPG Industries | Air Products vs. Ecolab Inc | Air Products vs. Sherwin Williams Co | Air Products vs. LyondellBasell Industries NV |
| Diageo PLC vs. Brown Forman | Diageo PLC vs. MGP Ingredients | Diageo PLC vs. Duckhorn Portfolio | Diageo PLC vs. Brown Forman |
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 Crypto Correlations module to use cryptocurrency correlation module to diversify your cryptocurrency portfolio across multiple coins.
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