Correlation Between Crimson Wine and Diageo PLC
Can any of the company-specific risk be diversified away by investing in both Crimson Wine 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 Crimson Wine and Diageo PLC into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Crimson Wine and Diageo PLC ADR, you can compare the effects of market volatilities on Crimson Wine 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 Crimson Wine with a short position of Diageo PLC. Check out your portfolio center. Please also check ongoing floating volatility patterns of Crimson Wine and Diageo PLC.
Diversification Opportunities for Crimson Wine and Diageo PLC
-0.15 | Correlation Coefficient |
Good diversification
The 3 months correlation between Crimson and Diageo is -0.15. Overlapping area represents the amount of risk that can be diversified away by holding Crimson Wine 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 Crimson Wine 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 Crimson Wine 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 Crimson Wine i.e., Crimson Wine and Diageo PLC go up and down completely randomly.
Pair Corralation between Crimson Wine and Diageo PLC
Given the investment horizon of 90 days Crimson Wine is expected to generate 15.72 times less return on investment than Diageo PLC. In addition to that, Crimson Wine is 1.47 times more volatile than Diageo PLC ADR. It trades about 0.01 of its total potential returns per unit of risk. Diageo PLC ADR is currently generating about 0.21 per unit of volatility. If you would invest 11,968 in Diageo PLC ADR on September 13, 2024 and sell it today you would earn a total of 702.00 from holding Diageo PLC ADR or generate 5.87% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Crimson Wine vs. Diageo PLC ADR
Performance |
| Timeline |
| Crimson Wine |
| Diageo PLC ADR |
Crimson Wine and Diageo PLC Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Crimson Wine and Diageo PLC
The main advantage of trading using opposite Crimson Wine and Diageo PLC positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Crimson Wine 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.| Crimson Wine vs. Pernod Ricard SA | Crimson Wine vs. Naked Wines plc | Crimson Wine vs. Willamette Valley Vineyards | Crimson Wine vs. Brown Forman |
| 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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.
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