Correlation Between GE Vernova and Diageo PLC
Can any of the company-specific risk be diversified away by investing in both GE Vernova 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 GE Vernova and Diageo PLC into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between GE Vernova LLC and Diageo PLC ADR, you can compare the effects of market volatilities on GE Vernova 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 GE Vernova with a short position of Diageo PLC. Check out your portfolio center. Please also check ongoing floating volatility patterns of GE Vernova and Diageo PLC.
Diversification Opportunities for GE Vernova and Diageo PLC
-0.62 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between GEV and Diageo is -0.62. Overlapping area represents the amount of risk that can be diversified away by holding GE Vernova LLC and Diageo PLC ADR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Diageo PLC ADR and GE Vernova 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 GE Vernova LLC 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 ADR has no effect on the direction of GE Vernova i.e., GE Vernova and Diageo PLC go up and down completely randomly.
Pair Corralation between GE Vernova and Diageo PLC
Considering the 90-day investment horizon GE Vernova LLC is expected to generate 2.22 times more return on investment than Diageo PLC. However, GE Vernova is 2.22 times more volatile than Diageo PLC ADR. It trades about 0.19 of its potential returns per unit of risk. Diageo PLC ADR is currently generating about -0.05 per unit of risk. If you would invest 13,125 in GE Vernova LLC on September 2, 2024 and sell it today you would earn a total of 20,287 from holding GE Vernova LLC or generate 154.57% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 46.51% |
| Values | Daily Returns |
GE Vernova LLC vs. Diageo PLC ADR
Performance |
| Timeline |
| GE Vernova LLC |
| Diageo PLC ADR |
GE Vernova and Diageo PLC Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with GE Vernova and Diageo PLC
The main advantage of trading using opposite GE Vernova and Diageo PLC positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GE Vernova 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.| GE Vernova vs. Sonos Inc | GE Vernova vs. JD Sports Fashion | GE Vernova vs. Boston Properties | GE Vernova vs. Mid Atlantic Home Health |
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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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.
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