Correlation Between Diageo PLC and Niagara Mohawk
Can any of the company-specific risk be diversified away by investing in both Diageo PLC and Niagara Mohawk 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 Niagara Mohawk 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 Niagara Mohawk Power, you can compare the effects of market volatilities on Diageo PLC and Niagara Mohawk 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 Niagara Mohawk. Check out your portfolio center. Please also check ongoing floating volatility patterns of Diageo PLC and Niagara Mohawk.
Diversification Opportunities for Diageo PLC and Niagara Mohawk
-0.36 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Diageo and Niagara is -0.36. Overlapping area represents the amount of risk that can be diversified away by holding Diageo PLC ADR and Niagara Mohawk Power in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Niagara Mohawk Power 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 Niagara Mohawk. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Niagara Mohawk Power has no effect on the direction of Diageo PLC i.e., Diageo PLC and Niagara Mohawk go up and down completely randomly.
Pair Corralation between Diageo PLC and Niagara Mohawk
Considering the 90-day investment horizon Diageo PLC ADR is expected to generate 0.82 times more return on investment than Niagara Mohawk. However, Diageo PLC ADR is 1.21 times less risky than Niagara Mohawk. It trades about 0.32 of its potential returns per unit of risk. Niagara Mohawk Power is currently generating about -0.23 per unit of risk. If you would invest 11,985 in Diageo PLC ADR on September 15, 2024 and sell it today you would earn a total of 1,160 from holding Diageo PLC ADR or generate 9.68% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Diageo PLC ADR vs. Niagara Mohawk Power
Performance |
| Timeline |
| Diageo PLC ADR |
| Niagara Mohawk Power |
Diageo PLC and Niagara Mohawk Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Diageo PLC and Niagara Mohawk
The main advantage of trading using opposite Diageo PLC and Niagara Mohawk positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Diageo PLC position performs unexpectedly, Niagara Mohawk 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 Niagara Mohawk will offset losses from the drop in Niagara Mohawk's long position.| Diageo PLC vs. Naked Wines plc | Diageo PLC vs. Andrew Peller Limited | Diageo PLC vs. Iconic Brands | Diageo PLC vs. Naked Wines plc |
| Niagara Mohawk vs. Copa Holdings SA | Niagara Mohawk vs. United Airlines Holdings | Niagara Mohawk vs. Delta Air Lines | Niagara Mohawk vs. SkyWest |
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 Financial Widgets module to easily integrated Macroaxis content with over 30 different plug-and-play financial widgets.
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