Correlation Between China Datang and Diageo Plc
Can any of the company-specific risk be diversified away by investing in both China Datang and Diageo 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 China Datang and Diageo Plc into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between China Datang and Diageo plc, you can compare the effects of market volatilities on China Datang and Diageo 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 China Datang with a short position of Diageo Plc. Check out your portfolio center. Please also check ongoing floating volatility patterns of China Datang and Diageo Plc.
Diversification Opportunities for China Datang and Diageo Plc
0.33 | Correlation Coefficient |
Weak diversification
The 3 months correlation between China and Diageo is 0.33. Overlapping area represents the amount of risk that can be diversified away by holding China Datang and Diageo plc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Diageo plc and China Datang 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 China Datang are associated (or correlated) with Diageo Plc. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Diageo plc has no effect on the direction of China Datang i.e., China Datang and Diageo Plc go up and down completely randomly.
Pair Corralation between China Datang and Diageo Plc
Assuming the 90 days horizon China Datang is expected to generate 1.32 times more return on investment than Diageo Plc. However, China Datang is 1.32 times more volatile than Diageo plc. It trades about 0.01 of its potential returns per unit of risk. Diageo plc is currently generating about -0.16 per unit of risk. If you would invest 24.00 in China Datang on October 25, 2024 and sell it today you would earn a total of 0.00 from holding China Datang or generate 0.0% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
China Datang vs. Diageo plc
Performance |
| Timeline |
| China Datang |
| Diageo plc |
China Datang and Diageo Plc Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with China Datang and Diageo Plc
The main advantage of trading using opposite China Datang and Diageo Plc positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if China Datang position performs unexpectedly, Diageo 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 Diageo Plc will offset losses from the drop in Diageo Plc's long position.| China Datang vs. Charter Communications | China Datang vs. OPERA SOFTWARE | China Datang vs. FORMPIPE SOFTWARE AB | China Datang vs. USU Software AG |
| Diageo Plc vs. Harmony Gold Mining | Diageo Plc vs. Singapore Telecommunications Limited | Diageo Plc vs. SOCKET MOBILE NEW | Diageo Plc vs. Western Copper and |
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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.
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