Correlation Between Diageo PLC and FTAI Aviation
Can any of the company-specific risk be diversified away by investing in both Diageo PLC and FTAI Aviation 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 FTAI Aviation 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 FTAI Aviation Ltd, you can compare the effects of market volatilities on Diageo PLC and FTAI Aviation 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 FTAI Aviation. Check out your portfolio center. Please also check ongoing floating volatility patterns of Diageo PLC and FTAI Aviation.
Diversification Opportunities for Diageo PLC and FTAI Aviation
-0.65 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Diageo and FTAI is -0.65. Overlapping area represents the amount of risk that can be diversified away by holding Diageo PLC ADR and FTAI Aviation Ltd in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on FTAI Aviation 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 FTAI Aviation. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of FTAI Aviation has no effect on the direction of Diageo PLC i.e., Diageo PLC and FTAI Aviation go up and down completely randomly.
Pair Corralation between Diageo PLC and FTAI Aviation
Considering the 90-day investment horizon Diageo PLC ADR is expected to under-perform the FTAI Aviation. In addition to that, Diageo PLC is 1.15 times more volatile than FTAI Aviation Ltd. It trades about -0.27 of its total potential returns per unit of risk. FTAI Aviation Ltd is currently generating about 0.13 per unit of volatility. If you would invest 2,705 in FTAI Aviation Ltd on August 31, 2024 and sell it today you would earn a total of 83.00 from holding FTAI Aviation Ltd or generate 3.07% 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. FTAI Aviation Ltd
Performance |
| Timeline |
| Diageo PLC ADR |
| FTAI Aviation |
Diageo PLC and FTAI Aviation Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Diageo PLC and FTAI Aviation
The main advantage of trading using opposite Diageo PLC and FTAI Aviation positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Diageo PLC position performs unexpectedly, FTAI Aviation 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 FTAI Aviation will offset losses from the drop in FTAI Aviation'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 |
| FTAI Aviation vs. Commonwealth Bank of | FTAI Aviation vs. East Africa Metals | FTAI Aviation vs. Arrow Financial | FTAI Aviation vs. LithiumBank Resources Corp |
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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.
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