Correlation Between Diageo PLC and Whitbread Plc
Can any of the company-specific risk be diversified away by investing in both Diageo PLC and Whitbread Plc 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 Whitbread Plc 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 Whitbread plc, you can compare the effects of market volatilities on Diageo PLC and Whitbread Plc 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 Whitbread Plc. Check out your portfolio center. Please also check ongoing floating volatility patterns of Diageo PLC and Whitbread Plc.
Diversification Opportunities for Diageo PLC and Whitbread Plc
-0.52 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Diageo and Whitbread is -0.52. Overlapping area represents the amount of risk that can be diversified away by holding Diageo PLC ADR and Whitbread plc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Whitbread plc 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 Whitbread Plc. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Whitbread plc has no effect on the direction of Diageo PLC i.e., Diageo PLC and Whitbread Plc go up and down completely randomly.
Pair Corralation between Diageo PLC and Whitbread Plc
Considering the 90-day investment horizon Diageo PLC ADR is expected to generate 0.68 times more return on investment than Whitbread Plc. However, Diageo PLC ADR is 1.47 times less risky than Whitbread Plc. It trades about -0.01 of its potential returns per unit of risk. Whitbread plc is currently generating about -0.04 per unit of risk. If you would invest 14,135 in Diageo PLC ADR on September 14, 2024 and sell it today you would lose (929.00) from holding Diageo PLC ADR or give up 6.57% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 65.46% |
| Values | Daily Returns |
Diageo PLC ADR vs. Whitbread plc
Performance |
| Timeline |
| Diageo PLC ADR |
| Whitbread plc |
Diageo PLC and Whitbread Plc Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Diageo PLC and Whitbread Plc
The main advantage of trading using opposite Diageo PLC and Whitbread Plc positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Diageo PLC position performs unexpectedly, Whitbread Plc 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 Whitbread Plc will offset losses from the drop in Whitbread Plc's 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 |
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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 Money Managers module to screen money managers from public funds and ETFs managed around the world.
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