Correlation Between Diageo PLC and Kaiser Aluminum
Can any of the company-specific risk be diversified away by investing in both Diageo PLC and Kaiser 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 Kaiser 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 Kaiser Aluminum, you can compare the effects of market volatilities on Diageo PLC and Kaiser 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 Kaiser Aluminum. Check out your portfolio center. Please also check ongoing floating volatility patterns of Diageo PLC and Kaiser Aluminum.
Diversification Opportunities for Diageo PLC and Kaiser Aluminum
-0.73 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between Diageo and Kaiser is -0.73. Overlapping area represents the amount of risk that can be diversified away by holding Diageo PLC ADR and Kaiser Aluminum in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Kaiser 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 Kaiser Aluminum. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Kaiser Aluminum has no effect on the direction of Diageo PLC i.e., Diageo PLC and Kaiser Aluminum go up and down completely randomly.
Pair Corralation between Diageo PLC and Kaiser Aluminum
Considering the 90-day investment horizon Diageo PLC ADR is expected to under-perform the Kaiser Aluminum. But the stock apears to be less risky and, when comparing its historical volatility, Diageo PLC ADR is 1.96 times less risky than Kaiser Aluminum. The stock trades about -0.35 of its potential returns per unit of risk. The Kaiser Aluminum is currently generating about 0.19 of returns per unit of risk over similar time horizon. If you would invest 7,607 in Kaiser Aluminum on August 28, 2024 and sell it today you would earn a total of 771.00 from holding Kaiser Aluminum or generate 10.14% 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. Kaiser Aluminum
Performance |
| Timeline |
| Diageo PLC ADR |
| Kaiser Aluminum |
Diageo PLC and Kaiser Aluminum Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Diageo PLC and Kaiser Aluminum
The main advantage of trading using opposite Diageo PLC and Kaiser Aluminum positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Diageo PLC position performs unexpectedly, Kaiser 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 Kaiser Aluminum will offset losses from the drop in Kaiser Aluminum's long position.| Diageo PLC vs. Brown Forman | Diageo PLC vs. MGP Ingredients | Diageo PLC vs. Duckhorn Portfolio | Diageo PLC vs. Brown Forman |
| Kaiser Aluminum vs. Century Aluminum | Kaiser Aluminum vs. China Hongqiao Group | Kaiser Aluminum vs. Constellium Nv | Kaiser Aluminum vs. Alcoa 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 Stock Tickers module to use high-impact, comprehensive, and customizable stock tickers that can be easily integrated to any websites.
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