Correlation Between Diageo PLC and Iconic Brands
Can any of the company-specific risk be diversified away by investing in both Diageo PLC and Iconic Brands 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 Iconic Brands 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 Iconic Brands, you can compare the effects of market volatilities on Diageo PLC and Iconic Brands 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 Iconic Brands. Check out your portfolio center. Please also check ongoing floating volatility patterns of Diageo PLC and Iconic Brands.
Diversification Opportunities for Diageo PLC and Iconic Brands
0.0 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between Diageo and Iconic is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding Diageo PLC ADR and Iconic Brands in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Iconic Brands 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 Iconic Brands. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Iconic Brands has no effect on the direction of Diageo PLC i.e., Diageo PLC and Iconic Brands go up and down completely randomly.
Pair Corralation between Diageo PLC and Iconic Brands
Considering the 90-day investment horizon Diageo PLC ADR is expected to generate 0.06 times more return on investment than Iconic Brands. However, Diageo PLC ADR is 17.57 times less risky than Iconic Brands. It trades about -0.45 of its potential returns per unit of risk. Iconic Brands is currently generating about -0.21 per unit of risk. If you would invest 13,419 in Diageo PLC ADR on August 24, 2024 and sell it today you would lose (1,609) from holding Diageo PLC ADR or give up 11.99% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Flat |
| Strength | Insignificant |
| Accuracy | 95.65% |
| Values | Daily Returns |
Diageo PLC ADR vs. Iconic Brands
Performance |
| Timeline |
| Diageo PLC ADR |
| Iconic Brands |
Diageo PLC and Iconic Brands Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Diageo PLC and Iconic Brands
The main advantage of trading using opposite Diageo PLC and Iconic Brands positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Diageo PLC position performs unexpectedly, Iconic Brands 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 Iconic Brands will offset losses from the drop in Iconic Brands' long position.| Diageo PLC vs. Brown Forman | Diageo PLC vs. MGP Ingredients | Diageo PLC vs. Duckhorn Portfolio | Diageo PLC vs. Brown Forman |
| Iconic Brands vs. Diageo PLC ADR | Iconic Brands vs. Constellation Brands Class | Iconic Brands vs. Thai Beverage PCL | Iconic Brands vs. Morningstar Unconstrained Allocation |
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 Economic Indicators module to top statistical indicators that provide insights into how an economy is performing.
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