Correlation Between Diageo PLC and VERIZON

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Can any of the company-specific risk be diversified away by investing in both Diageo PLC and VERIZON 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 VERIZON 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 VERIZON MUNICATIONS INC, you can compare the effects of market volatilities on Diageo PLC and VERIZON 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 VERIZON. Check out your portfolio center. Please also check ongoing floating volatility patterns of Diageo PLC and VERIZON.

Diversification Opportunities for Diageo PLC and VERIZON

DiageoVERIZONDiversified AwayDiageoVERIZONDiversified Away100%
0.03
  Correlation Coefficient

Significant diversification

The 3 months correlation between Diageo and VERIZON is 0.03. Overlapping area represents the amount of risk that can be diversified away by holding Diageo PLC ADR and VERIZON MUNICATIONS INC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on VERIZON MUNICATIONS 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 VERIZON. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of VERIZON MUNICATIONS INC has no effect on the direction of Diageo PLC i.e., Diageo PLC and VERIZON go up and down completely randomly.

Pair Corralation between Diageo PLC and VERIZON

Considering the 90-day investment horizon Diageo PLC ADR is expected to under-perform the VERIZON. In addition to that, Diageo PLC is 1.3 times more volatile than VERIZON MUNICATIONS INC. It trades about -0.34 of its total potential returns per unit of risk. VERIZON MUNICATIONS INC is currently generating about 0.26 per unit of volatility. If you would invest  6,759  in VERIZON MUNICATIONS INC on November 25, 2024 and sell it today you would earn a total of  476.00  from holding VERIZON MUNICATIONS INC or generate 7.04% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthInsignificant
Accuracy100.0%
ValuesDaily Returns

Diageo PLC ADR  vs.  VERIZON MUNICATIONS INC

 Performance 
JavaScript chart by amCharts 3.21.15Dec2025Feb -10-50510
JavaScript chart by amCharts 3.21.15DEO 92343VGC2
       Timeline  
Diageo PLC ADR 

Risk-Adjusted Performance

Very Weak

 
Weak
 
Strong
Over the last 90 days Diageo PLC ADR has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest weak performance, the Stock's technical and fundamental indicators remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the firm investors.
JavaScript chart by amCharts 3.21.15DecJanFebJanFeb110115120125130
VERIZON MUNICATIONS INC 

Risk-Adjusted Performance

Weak

 
Weak
 
Strong
Compared to the overall equity markets, risk-adjusted returns on investments in VERIZON MUNICATIONS INC are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, VERIZON is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.
JavaScript chart by amCharts 3.21.156667686970717273

Diageo PLC and VERIZON Volatility Contrast

   Predicted Return Density   
JavaScript chart by amCharts 3.21.15-2.96-2.21-1.47-0.730.00.681.372.072.773.47 0.050.100.150.200.250.300.35
JavaScript chart by amCharts 3.21.15DEO 92343VGC2
       Returns  

Pair Trading with Diageo PLC and VERIZON

The main advantage of trading using opposite Diageo PLC and VERIZON positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Diageo PLC position performs unexpectedly, VERIZON 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 VERIZON will offset losses from the drop in VERIZON's long position.
The idea behind Diageo PLC ADR and VERIZON MUNICATIONS INC pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.
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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 Content Syndication module to quickly integrate customizable finance content to your own investment portal.

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