Correlation Between Diageo PLC and Century Aluminum
Can any of the company-specific risk be diversified away by investing in both Diageo PLC and Century Aluminum 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 Century Aluminum 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 Century Aluminum, you can compare the effects of market volatilities on Diageo PLC and Century Aluminum 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 Century Aluminum. Check out your portfolio center. Please also check ongoing floating volatility patterns of Diageo PLC and Century Aluminum.
Diversification Opportunities for Diageo PLC and Century Aluminum
-0.62 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Diageo and Century is -0.62. Overlapping area represents the amount of risk that can be diversified away by holding Diageo PLC ADR and Century Aluminum in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Century Aluminum 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 Century Aluminum. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Century Aluminum has no effect on the direction of Diageo PLC i.e., Diageo PLC and Century Aluminum go up and down completely randomly.
Pair Corralation between Diageo PLC and Century Aluminum
Considering the 90-day investment horizon Diageo PLC ADR is expected to under-perform the Century Aluminum. But the stock apears to be less risky and, when comparing its historical volatility, Diageo PLC ADR is 3.74 times less risky than Century Aluminum. The stock trades about -0.35 of its potential returns per unit of risk. The Century Aluminum is currently generating about 0.25 of returns per unit of risk over similar time horizon. If you would invest 1,823 in Century Aluminum on August 28, 2024 and sell it today you would earn a total of 501.00 from holding Century Aluminum or generate 27.48% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Diageo PLC ADR vs. Century Aluminum
Performance |
| Timeline |
| Diageo PLC ADR |
| Century Aluminum |
Diageo PLC and Century Aluminum Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Diageo PLC and Century Aluminum
The main advantage of trading using opposite Diageo PLC and Century Aluminum positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Diageo PLC position performs unexpectedly, Century Aluminum 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 Century Aluminum will offset losses from the drop in Century Aluminum's long position.| Diageo PLC vs. Brown Forman | Diageo PLC vs. MGP Ingredients | Diageo PLC vs. Duckhorn Portfolio | Diageo PLC vs. Brown Forman |
| Century Aluminum vs. Kaiser Aluminum | Century Aluminum vs. Commercial Metals | Century Aluminum vs. Steel Dynamics | Century Aluminum vs. Reliance Steel Aluminum |
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 Global Correlations module to find global opportunities by holding instruments from different markets.
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