Correlation Between Diageo PLC and NH Foods
Can any of the company-specific risk be diversified away by investing in both Diageo PLC and NH Foods 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 NH Foods 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 NH Foods Ltd, you can compare the effects of market volatilities on Diageo PLC and NH Foods 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 NH Foods. Check out your portfolio center. Please also check ongoing floating volatility patterns of Diageo PLC and NH Foods.
Diversification Opportunities for Diageo PLC and NH Foods
0.0 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between Diageo and NIPMY is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding Diageo PLC ADR and NH Foods Ltd in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NH Foods 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 NH Foods. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of NH Foods has no effect on the direction of Diageo PLC i.e., Diageo PLC and NH Foods go up and down completely randomly.
Pair Corralation between Diageo PLC and NH Foods
Considering the 90-day investment horizon Diageo PLC ADR is expected to under-perform the NH Foods. In addition to that, Diageo PLC is 1.8 times more volatile than NH Foods Ltd. It trades about -0.05 of its total potential returns per unit of risk. NH Foods Ltd is currently generating about 0.1 per unit of volatility. If you would invest 1,203 in NH Foods Ltd on August 24, 2024 and sell it today you would earn a total of 497.00 from holding NH Foods Ltd or generate 41.31% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Flat |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Diageo PLC ADR vs. NH Foods Ltd
Performance |
| Timeline |
| Diageo PLC ADR |
| NH Foods |
Diageo PLC and NH Foods Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Diageo PLC and NH Foods
The main advantage of trading using opposite Diageo PLC and NH Foods positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Diageo PLC position performs unexpectedly, NH Foods 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 NH Foods will offset losses from the drop in NH Foods' long position.| Diageo PLC vs. Brown Forman | Diageo PLC vs. MGP Ingredients | Diageo PLC vs. Duckhorn Portfolio | Diageo PLC vs. Brown Forman |
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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.
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