Correlation Between HNI Corp and Diageo PLC
Can any of the company-specific risk be diversified away by investing in both HNI Corp 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 HNI Corp and Diageo PLC into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between HNI Corp and Diageo PLC ADR, you can compare the effects of market volatilities on HNI Corp 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 HNI Corp with a short position of Diageo PLC. Check out your portfolio center. Please also check ongoing floating volatility patterns of HNI Corp and Diageo PLC.
Diversification Opportunities for HNI Corp and Diageo PLC
-0.19 | Correlation Coefficient |
Good diversification
The 3 months correlation between HNI and Diageo is -0.19. Overlapping area represents the amount of risk that can be diversified away by holding HNI Corp 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 HNI Corp 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 HNI Corp 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 HNI Corp i.e., HNI Corp and Diageo PLC go up and down completely randomly.
Pair Corralation between HNI Corp and Diageo PLC
Considering the 90-day investment horizon HNI Corp is expected to generate 1.4 times more return on investment than Diageo PLC. However, HNI Corp is 1.4 times more volatile than Diageo PLC ADR. It trades about 0.09 of its potential returns per unit of risk. Diageo PLC ADR is currently generating about -0.06 per unit of risk. If you would invest 2,686 in HNI Corp on August 24, 2024 and sell it today you would earn a total of 2,870 from holding HNI Corp or generate 106.85% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
HNI Corp vs. Diageo PLC ADR
Performance |
| Timeline |
| HNI Corp |
| Diageo PLC ADR |
HNI Corp and Diageo PLC Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with HNI Corp and Diageo PLC
The main advantage of trading using opposite HNI Corp and Diageo PLC positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if HNI Corp 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.The idea behind HNI Corp and Diageo PLC ADR pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.| Diageo PLC vs. Willamette Valley Vineyards | Diageo PLC vs. Splash Beverage Group | Diageo PLC vs. Naked Wines plc | Diageo PLC vs. Treasury Wine Estates |
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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.
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