Correlation Between Diageo PLC and Global Net
Can any of the company-specific risk be diversified away by investing in both Diageo PLC and Global Net 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 Global Net into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Diageo PLC and Global Net Lease, you can compare the effects of market volatilities on Diageo PLC and Global Net 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 Global Net. Check out your portfolio center. Please also check ongoing floating volatility patterns of Diageo PLC and Global Net.
Diversification Opportunities for Diageo PLC and Global Net
0.7 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Diageo and Global is 0.7. Overlapping area represents the amount of risk that can be diversified away by holding Diageo PLC and Global Net Lease in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Global Net Lease 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 are associated (or correlated) with Global Net. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Global Net Lease has no effect on the direction of Diageo PLC i.e., Diageo PLC and Global Net go up and down completely randomly.
Pair Corralation between Diageo PLC and Global Net
Assuming the 90 days trading horizon Diageo PLC is expected to under-perform the Global Net. But the stock apears to be less risky and, when comparing its historical volatility, Diageo PLC is 2.03 times less risky than Global Net. The stock trades about -0.05 of its potential returns per unit of risk. The Global Net Lease is currently generating about -0.01 of returns per unit of risk over similar time horizon. If you would invest 916.00 in Global Net Lease on September 12, 2024 and sell it today you would lose (192.00) from holding Global Net Lease or give up 20.96% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 99.44% |
| Values | Daily Returns |
Diageo PLC vs. Global Net Lease
Performance |
| Timeline |
| Diageo PLC |
| Global Net Lease |
Diageo PLC and Global Net Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Diageo PLC and Global Net
The main advantage of trading using opposite Diageo PLC and Global Net positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Diageo PLC position performs unexpectedly, Global Net 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 Global Net will offset losses from the drop in Global Net's long position.| Diageo PLC vs. Global Net Lease | Diageo PLC vs. United States Steel | Diageo PLC vs. Telecom Italia SpA | Diageo PLC vs. Symphony Environmental Technologies |
| Global Net vs. Hong Kong Land | Global Net vs. Neometals | Global Net vs. Coor Service Management | Global Net vs. Fidelity Sustainable USD |
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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.
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