Correlation Between Diageo PLC and Visteon Corp
Can any of the company-specific risk be diversified away by investing in both Diageo PLC and Visteon Corp 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 Visteon Corp 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 Visteon Corp, you can compare the effects of market volatilities on Diageo PLC and Visteon Corp 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 Visteon Corp. Check out your portfolio center. Please also check ongoing floating volatility patterns of Diageo PLC and Visteon Corp.
Diversification Opportunities for Diageo PLC and Visteon Corp
0.23 | Correlation Coefficient |
Modest diversification
The 3 months correlation between Diageo and Visteon is 0.23. Overlapping area represents the amount of risk that can be diversified away by holding Diageo PLC ADR and Visteon Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Visteon Corp 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 Visteon Corp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Visteon Corp has no effect on the direction of Diageo PLC i.e., Diageo PLC and Visteon Corp go up and down completely randomly.
Pair Corralation between Diageo PLC and Visteon Corp
Considering the 90-day investment horizon Diageo PLC ADR is expected to generate 0.7 times more return on investment than Visteon Corp. However, Diageo PLC ADR is 1.43 times less risky than Visteon Corp. It trades about -0.04 of its potential returns per unit of risk. Visteon Corp is currently generating about -0.05 per unit of risk. If you would invest 16,527 in Diageo PLC ADR on November 2, 2024 and sell it today you would lose (4,499) from holding Diageo PLC ADR or give up 27.22% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Diageo PLC ADR vs. Visteon Corp
Performance |
| Timeline |
| Diageo PLC ADR |
| Visteon Corp |
Diageo PLC and Visteon Corp Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Diageo PLC and Visteon Corp
The main advantage of trading using opposite Diageo PLC and Visteon Corp positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Diageo PLC position performs unexpectedly, Visteon Corp 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 Visteon Corp will offset losses from the drop in Visteon Corp's long position.| Diageo PLC vs. Brown Forman | Diageo PLC vs. MGP Ingredients | Diageo PLC vs. Brown Forman | Diageo PLC vs. Constellation Brands Class |
| Visteon Corp vs. Gentex | Visteon Corp vs. Adient PLC | Visteon Corp vs. Autoliv | Visteon Corp vs. Fox Factory Holding |
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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.
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