Correlation Between Diageo PLC and Lincoln Educational
Can any of the company-specific risk be diversified away by investing in both Diageo PLC and Lincoln Educational 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 Lincoln Educational 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 Lincoln Educational Services, you can compare the effects of market volatilities on Diageo PLC and Lincoln Educational 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 Lincoln Educational. Check out your portfolio center. Please also check ongoing floating volatility patterns of Diageo PLC and Lincoln Educational.
Diversification Opportunities for Diageo PLC and Lincoln Educational
-0.85 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between Diageo and Lincoln is -0.85. Overlapping area represents the amount of risk that can be diversified away by holding Diageo PLC ADR and Lincoln Educational Services in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lincoln Educational 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 Lincoln Educational. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lincoln Educational has no effect on the direction of Diageo PLC i.e., Diageo PLC and Lincoln Educational go up and down completely randomly.
Pair Corralation between Diageo PLC and Lincoln Educational
Considering the 90-day investment horizon Diageo PLC ADR is expected to under-perform the Lincoln Educational. But the stock apears to be less risky and, when comparing its historical volatility, Diageo PLC ADR is 2.98 times less risky than Lincoln Educational. The stock trades about -0.16 of its potential returns per unit of risk. The Lincoln Educational Services is currently generating about 0.32 of returns per unit of risk over similar time horizon. If you would invest 1,328 in Lincoln Educational Services on September 1, 2024 and sell it today you would earn a total of 315.00 from holding Lincoln Educational Services or generate 23.72% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Diageo PLC ADR vs. Lincoln Educational Services
Performance |
| Timeline |
| Diageo PLC ADR |
| Lincoln Educational |
Diageo PLC and Lincoln Educational Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Diageo PLC and Lincoln Educational
The main advantage of trading using opposite Diageo PLC and Lincoln Educational positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Diageo PLC position performs unexpectedly, Lincoln Educational 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 Lincoln Educational will offset losses from the drop in Lincoln Educational's long position.| Diageo PLC vs. Brown Forman | Diageo PLC vs. Duckhorn Portfolio | Diageo PLC vs. Brown Forman | Diageo PLC vs. Constellation Brands Class |
| Lincoln Educational vs. American Public Education | Lincoln Educational vs. ATA Creativity Global | Lincoln Educational vs. Cogna Educacao SA | Lincoln Educational vs. Adtalem Global Education |
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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.
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