Correlation Between Diageo PLC and BCE
Can any of the company-specific risk be diversified away by investing in both Diageo PLC and BCE 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 Diageo PLC and BCE into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Diageo PLC ADR and BCE Inc, you can compare the effects of market volatilities on Diageo PLC and BCE 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 Diageo PLC with a short position of BCE. Check out your portfolio center. Please also check ongoing floating volatility patterns of Diageo PLC and BCE.
Diversification Opportunities for Diageo PLC and BCE
0.83 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Diageo and BCE is 0.83. Overlapping area represents the amount of risk that can be diversified away by holding Diageo PLC ADR and BCE Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BCE Inc and Diageo 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 Diageo PLC ADR are associated (or correlated) with BCE. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BCE Inc has no effect on the direction of Diageo PLC i.e., Diageo PLC and BCE go up and down completely randomly.
Pair Corralation between Diageo PLC and BCE
Considering the 90-day investment horizon Diageo PLC ADR is expected to generate 1.13 times more return on investment than BCE. However, Diageo PLC is 1.13 times more volatile than BCE Inc. It trades about 0.24 of its potential returns per unit of risk. BCE Inc is currently generating about -0.44 per unit of risk. If you would invest 11,892 in Diageo PLC ADR on September 19, 2024 and sell it today you would earn a total of 902.00 from holding Diageo PLC ADR or generate 7.58% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 95.45% |
| Values | Daily Returns |
Diageo PLC ADR vs. BCE Inc
Performance |
| Timeline |
| Diageo PLC ADR |
| BCE Inc |
Diageo PLC and BCE Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Diageo PLC and BCE
The main advantage of trading using opposite Diageo PLC and BCE positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Diageo PLC position performs unexpectedly, BCE 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 BCE will offset losses from the drop in BCE's long position.| Diageo PLC vs. Naked Wines plc | Diageo PLC vs. Andrew Peller Limited | Diageo PLC vs. Iconic Brands | Diageo PLC vs. Naked Wines plc |
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 Bond Analysis module to evaluate and analyze corporate bonds as a potential investment for your portfolios..
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