Correlation Between Diageo PLC and MCF Energy
Can any of the company-specific risk be diversified away by investing in both Diageo PLC and MCF Energy 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 MCF Energy 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 MCF Energy, you can compare the effects of market volatilities on Diageo PLC and MCF Energy 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 MCF Energy. Check out your portfolio center. Please also check ongoing floating volatility patterns of Diageo PLC and MCF Energy.
Diversification Opportunities for Diageo PLC and MCF Energy
0.66 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Diageo and MCF is 0.66. Overlapping area represents the amount of risk that can be diversified away by holding Diageo PLC ADR and MCF Energy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on MCF Energy 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 MCF Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of MCF Energy has no effect on the direction of Diageo PLC i.e., Diageo PLC and MCF Energy go up and down completely randomly.
Pair Corralation between Diageo PLC and MCF Energy
Considering the 90-day investment horizon Diageo PLC ADR is expected to generate 0.23 times more return on investment than MCF Energy. However, Diageo PLC ADR is 4.43 times less risky than MCF Energy. It trades about -0.04 of its potential returns per unit of risk. MCF Energy is currently generating about -0.04 per unit of risk. If you would invest 17,016 in Diageo PLC ADR on September 12, 2024 and sell it today you would lose (4,567) from holding Diageo PLC ADR or give up 26.84% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 97.58% |
| Values | Daily Returns |
Diageo PLC ADR vs. MCF Energy
Performance |
| Timeline |
| Diageo PLC ADR |
| MCF Energy |
Diageo PLC and MCF Energy Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Diageo PLC and MCF Energy
The main advantage of trading using opposite Diageo PLC and MCF Energy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Diageo PLC position performs unexpectedly, MCF Energy 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 MCF Energy will offset losses from the drop in MCF Energy's long position.| Diageo PLC vs. Andrew Peller Limited | Diageo PLC vs. Naked Wines plc | Diageo PLC vs. Willamette Valley Vineyards | Diageo PLC vs. Splash Beverage Group |
| MCF Energy vs. Kaltura | MCF Energy vs. Univest Pennsylvania | MCF Energy vs. CDW Corp | MCF Energy vs. Paltalk |
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 Earnings Calls module to check upcoming earnings announcements updated hourly across public exchanges.
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