Correlation Between Diageo PLC and Sealed Air
Can any of the company-specific risk be diversified away by investing in both Diageo PLC and Sealed Air 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 Sealed Air 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 Sealed Air, you can compare the effects of market volatilities on Diageo PLC and Sealed Air 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 Sealed Air. Check out your portfolio center. Please also check ongoing floating volatility patterns of Diageo PLC and Sealed Air.
Diversification Opportunities for Diageo PLC and Sealed Air
0.03 | Correlation Coefficient |
Significant diversification
The 3 months correlation between Diageo and Sealed is 0.03. Overlapping area represents the amount of risk that can be diversified away by holding Diageo PLC ADR and Sealed Air in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sealed Air 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 Sealed Air. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sealed Air has no effect on the direction of Diageo PLC i.e., Diageo PLC and Sealed Air go up and down completely randomly.
Pair Corralation between Diageo PLC and Sealed Air
Considering the 90-day investment horizon Diageo PLC ADR is expected to under-perform the Sealed Air. But the stock apears to be less risky and, when comparing its historical volatility, Diageo PLC ADR is 1.53 times less risky than Sealed Air. The stock trades about -0.05 of its potential returns per unit of risk. The Sealed Air is currently generating about -0.02 of returns per unit of risk over similar time horizon. If you would invest 5,044 in Sealed Air on August 28, 2024 and sell it today you would lose (1,449) from holding Sealed Air or give up 28.73% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Diageo PLC ADR vs. Sealed Air
Performance |
| Timeline |
| Diageo PLC ADR |
| Sealed Air |
Diageo PLC and Sealed Air Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Diageo PLC and Sealed Air
The main advantage of trading using opposite Diageo PLC and Sealed Air positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Diageo PLC position performs unexpectedly, Sealed Air 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 Sealed Air will offset losses from the drop in Sealed Air's long position.| Diageo PLC vs. Brown Forman | Diageo PLC vs. MGP Ingredients | Diageo PLC vs. Duckhorn Portfolio | Diageo PLC vs. Brown Forman |
| Sealed Air vs. Sonoco Products | Sealed Air vs. Reynolds Consumer Products | Sealed Air vs. Ball Corporation | Sealed Air vs. Crown Holdings |
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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.
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