Correlation Between Diageo PLC and Santech Holdings
Can any of the company-specific risk be diversified away by investing in both Diageo PLC and Santech Holdings 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 Santech Holdings 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 Santech Holdings Limited, you can compare the effects of market volatilities on Diageo PLC and Santech Holdings 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 Santech Holdings. Check out your portfolio center. Please also check ongoing floating volatility patterns of Diageo PLC and Santech Holdings.
Diversification Opportunities for Diageo PLC and Santech Holdings
-0.4 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Diageo and Santech is -0.4. Overlapping area represents the amount of risk that can be diversified away by holding Diageo PLC ADR and Santech Holdings Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Santech Holdings 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 Santech Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Santech Holdings has no effect on the direction of Diageo PLC i.e., Diageo PLC and Santech Holdings go up and down completely randomly.
Pair Corralation between Diageo PLC and Santech Holdings
Considering the 90-day investment horizon Diageo PLC ADR is expected to under-perform the Santech Holdings. But the stock apears to be less risky and, when comparing its historical volatility, Diageo PLC ADR is 52.74 times less risky than Santech Holdings. The stock trades about -0.1 of its potential returns per unit of risk. The Santech Holdings Limited is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest 52.00 in Santech Holdings Limited on August 30, 2024 and sell it today you would earn a total of 44.00 from holding Santech Holdings Limited or generate 84.62% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Diageo PLC ADR vs. Santech Holdings Limited
Performance |
| Timeline |
| Diageo PLC ADR |
| Santech Holdings |
Diageo PLC and Santech Holdings Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Diageo PLC and Santech Holdings
The main advantage of trading using opposite Diageo PLC and Santech Holdings positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Diageo PLC position performs unexpectedly, Santech Holdings 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 Santech Holdings will offset losses from the drop in Santech Holdings' 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 |
| Santech Holdings vs. FDG Electric Vehicles | Santech Holdings vs. Figs Inc | Santech Holdings vs. Visteon Corp | Santech Holdings vs. Adient PLC |
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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.
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