Correlation Between Diageo PLC and SNDL
Can any of the company-specific risk be diversified away by investing in both Diageo PLC and SNDL 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 SNDL 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 SNDL Inc, you can compare the effects of market volatilities on Diageo PLC and SNDL 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 SNDL. Check out your portfolio center. Please also check ongoing floating volatility patterns of Diageo PLC and SNDL.
Diversification Opportunities for Diageo PLC and SNDL
0.01 | Correlation Coefficient |
Significant diversification
The 3 months correlation between Diageo and SNDL is 0.01. Overlapping area represents the amount of risk that can be diversified away by holding Diageo PLC ADR and SNDL Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SNDL Inc 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 SNDL. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SNDL Inc has no effect on the direction of Diageo PLC i.e., Diageo PLC and SNDL go up and down completely randomly.
Pair Corralation between Diageo PLC and SNDL
Considering the 90-day investment horizon Diageo PLC ADR is expected to under-perform the SNDL. But the stock apears to be less risky and, when comparing its historical volatility, Diageo PLC ADR is 2.17 times less risky than SNDL. The stock trades about -0.05 of its potential returns per unit of risk. The SNDL Inc is currently generating about -0.01 of returns per unit of risk over similar time horizon. If you would invest 222.00 in SNDL Inc on August 24, 2024 and sell it today you would lose (24.00) from holding SNDL Inc or give up 10.81% 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. SNDL Inc
Performance |
| Timeline |
| Diageo PLC ADR |
| SNDL Inc |
Diageo PLC and SNDL Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Diageo PLC and SNDL
The main advantage of trading using opposite Diageo PLC and SNDL positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Diageo PLC position performs unexpectedly, SNDL 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 SNDL will offset losses from the drop in SNDL's long position.| Diageo PLC vs. Willamette Valley Vineyards | Diageo PLC vs. Splash Beverage Group | Diageo PLC vs. Naked Wines plc | Diageo PLC vs. Treasury Wine Estates |
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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.
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