Correlation Between Diageo PLC and Maanshan Iron
Can any of the company-specific risk be diversified away by investing in both Diageo PLC and Maanshan Iron 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 Maanshan Iron 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 Maanshan Iron Steel, you can compare the effects of market volatilities on Diageo PLC and Maanshan Iron 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 Maanshan Iron. Check out your portfolio center. Please also check ongoing floating volatility patterns of Diageo PLC and Maanshan Iron.
Diversification Opportunities for Diageo PLC and Maanshan Iron
-0.48 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Diageo and Maanshan is -0.48. Overlapping area represents the amount of risk that can be diversified away by holding Diageo PLC ADR and Maanshan Iron Steel in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Maanshan Iron Steel 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 Maanshan Iron. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Maanshan Iron Steel has no effect on the direction of Diageo PLC i.e., Diageo PLC and Maanshan Iron go up and down completely randomly.
Pair Corralation between Diageo PLC and Maanshan Iron
Considering the 90-day investment horizon Diageo PLC ADR is expected to generate 0.26 times more return on investment than Maanshan Iron. However, Diageo PLC ADR is 3.84 times less risky than Maanshan Iron. It trades about -0.16 of its potential returns per unit of risk. Maanshan Iron Steel is currently generating about -0.22 per unit of risk. If you would invest 12,421 in Diageo PLC ADR on September 2, 2024 and sell it today you would lose (485.00) from holding Diageo PLC ADR or give up 3.9% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Diageo PLC ADR vs. Maanshan Iron Steel
Performance |
| Timeline |
| Diageo PLC ADR |
| Maanshan Iron Steel |
Diageo PLC and Maanshan Iron Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Diageo PLC and Maanshan Iron
The main advantage of trading using opposite Diageo PLC and Maanshan Iron positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Diageo PLC position performs unexpectedly, Maanshan Iron 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 Maanshan Iron will offset losses from the drop in Maanshan Iron's long position.| Diageo PLC vs. Brown Forman | Diageo PLC vs. Duckhorn Portfolio | Diageo PLC vs. Brown Forman | Diageo PLC vs. Constellation Brands Class |
| Maanshan Iron vs. ArcelorMittal SA ADR | Maanshan Iron vs. Gerdau SA ADR | Maanshan Iron vs. POSCO Holdings |
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 Portfolio Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.
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