Correlation Between Mars Acquisition and Diageo PLC
Can any of the company-specific risk be diversified away by investing in both Mars Acquisition 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 Mars Acquisition and Diageo PLC into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Mars Acquisition Corp and Diageo PLC ADR, you can compare the effects of market volatilities on Mars Acquisition 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 Mars Acquisition with a short position of Diageo PLC. Check out your portfolio center. Please also check ongoing floating volatility patterns of Mars Acquisition and Diageo PLC.
Diversification Opportunities for Mars Acquisition and Diageo PLC
-0.47 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Mars and Diageo is -0.47. Overlapping area represents the amount of risk that can be diversified away by holding Mars Acquisition 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 Mars Acquisition 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 Mars Acquisition 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 Mars Acquisition i.e., Mars Acquisition and Diageo PLC go up and down completely randomly.
Pair Corralation between Mars Acquisition and Diageo PLC
Assuming the 90 days horizon Mars Acquisition Corp is expected to generate 5.39 times more return on investment than Diageo PLC. However, Mars Acquisition is 5.39 times more volatile than Diageo PLC ADR. It trades about 0.2 of its potential returns per unit of risk. Diageo PLC ADR is currently generating about 0.32 per unit of risk. If you would invest 30.00 in Mars Acquisition Corp on September 15, 2024 and sell it today you would earn a total of 8.00 from holding Mars Acquisition Corp or generate 26.67% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 90.48% |
| Values | Daily Returns |
Mars Acquisition Corp vs. Diageo PLC ADR
Performance |
| Timeline |
| Mars Acquisition Corp |
| Diageo PLC ADR |
Mars Acquisition and Diageo PLC Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Mars Acquisition and Diageo PLC
The main advantage of trading using opposite Mars Acquisition and Diageo PLC positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Mars Acquisition 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.| Mars Acquisition vs. Visa Class A | Mars Acquisition vs. Diamond Hill Investment | Mars Acquisition vs. Distoken Acquisition | Mars Acquisition vs. AllianceBernstein Holding LP |
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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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.
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