Correlation Between Diageo PLC and Altria
Can any of the company-specific risk be diversified away by investing in both Diageo PLC and Altria 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 Altria 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 Altria Group, you can compare the effects of market volatilities on Diageo PLC and Altria 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 Altria. Check out your portfolio center. Please also check ongoing floating volatility patterns of Diageo PLC and Altria.
Diversification Opportunities for Diageo PLC and Altria
-0.69 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Diageo and Altria is -0.69. Overlapping area represents the amount of risk that can be diversified away by holding Diageo PLC ADR and Altria Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Altria Group 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 Altria. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Altria Group has no effect on the direction of Diageo PLC i.e., Diageo PLC and Altria go up and down completely randomly.
Pair Corralation between Diageo PLC and Altria
Considering the 90-day investment horizon Diageo PLC ADR is expected to under-perform the Altria. In addition to that, Diageo PLC is 2.32 times more volatile than Altria Group. It trades about -0.14 of its total potential returns per unit of risk. Altria Group is currently generating about -0.11 per unit of volatility. If you would invest 5,281 in Altria Group on October 21, 2024 and sell it today you would lose (95.00) from holding Altria Group or give up 1.8% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Diageo PLC ADR vs. Altria Group
Performance |
| Timeline |
| Diageo PLC ADR |
| Altria Group |
Diageo PLC and Altria Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Diageo PLC and Altria
The main advantage of trading using opposite Diageo PLC and Altria positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Diageo PLC position performs unexpectedly, Altria 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 Altria will offset losses from the drop in Altria's long position.| Diageo PLC vs. Tiger Reef | Diageo PLC vs. MGP Ingredients | Diageo PLC vs. Brown Forman | Diageo PLC vs. Constellation Brands Class |
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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 Anywhere module to track or share privately all of your investments from the convenience of any device.
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