Correlation Between Diageo PLC and National CineMedia
Can any of the company-specific risk be diversified away by investing in both Diageo PLC and National CineMedia 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 National CineMedia 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 National CineMedia, you can compare the effects of market volatilities on Diageo PLC and National CineMedia 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 National CineMedia. Check out your portfolio center. Please also check ongoing floating volatility patterns of Diageo PLC and National CineMedia.
Diversification Opportunities for Diageo PLC and National CineMedia
0.21 | Correlation Coefficient |
Modest diversification
The 3 months correlation between Diageo and National is 0.21. Overlapping area represents the amount of risk that can be diversified away by holding Diageo PLC ADR and National CineMedia in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on National CineMedia 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 National CineMedia. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of National CineMedia has no effect on the direction of Diageo PLC i.e., Diageo PLC and National CineMedia go up and down completely randomly.
Pair Corralation between Diageo PLC and National CineMedia
Considering the 90-day investment horizon Diageo PLC ADR is expected to under-perform the National CineMedia. But the stock apears to be less risky and, when comparing its historical volatility, Diageo PLC ADR is 1.55 times less risky than National CineMedia. The stock trades about -0.08 of its potential returns per unit of risk. The National CineMedia is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest 674.00 in National CineMedia on September 2, 2024 and sell it today you would earn a total of 21.00 from holding National CineMedia or generate 3.12% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Diageo PLC ADR vs. National CineMedia
Performance |
| Timeline |
| Diageo PLC ADR |
| National CineMedia |
Diageo PLC and National CineMedia Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Diageo PLC and National CineMedia
The main advantage of trading using opposite Diageo PLC and National CineMedia positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Diageo PLC position performs unexpectedly, National CineMedia 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 National CineMedia will offset losses from the drop in National CineMedia's long position.| Diageo PLC vs. Brown Forman | Diageo PLC vs. Duckhorn Portfolio | Diageo PLC vs. Brown Forman | Diageo PLC vs. Constellation Brands Class |
| National CineMedia vs. MGO Global Common | National CineMedia vs. Baosheng Media Group | National CineMedia vs. Glory Star New | National CineMedia vs. Impact Fusion International |
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 USA ETFs module to find actively traded Exchange Traded Funds (ETF) in USA.
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