Correlation Between Oatly Group and Diageo PLC
Can any of the company-specific risk be diversified away by investing in both Oatly Group 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 Oatly Group and Diageo PLC into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Oatly Group AB and Diageo PLC ADR, you can compare the effects of market volatilities on Oatly Group 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 Oatly Group with a short position of Diageo PLC. Check out your portfolio center. Please also check ongoing floating volatility patterns of Oatly Group and Diageo PLC.
Diversification Opportunities for Oatly Group and Diageo PLC
-0.1 | Correlation Coefficient |
Good diversification
The 3 months correlation between Oatly and Diageo is -0.1. Overlapping area represents the amount of risk that can be diversified away by holding Oatly Group AB 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 Oatly Group 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 Oatly Group AB 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 Oatly Group i.e., Oatly Group and Diageo PLC go up and down completely randomly.
Pair Corralation between Oatly Group and Diageo PLC
Given the investment horizon of 90 days Oatly Group AB is expected to under-perform the Diageo PLC. In addition to that, Oatly Group is 2.94 times more volatile than Diageo PLC ADR. It trades about -0.04 of its total potential returns per unit of risk. Diageo PLC ADR is currently generating about -0.05 per unit of volatility. If you would invest 14,426 in Diageo PLC ADR on November 3, 2024 and sell it today you would lose (2,429) from holding Diageo PLC ADR or give up 16.84% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Oatly Group AB vs. Diageo PLC ADR
Performance |
| Timeline |
| Oatly Group AB |
| Diageo PLC ADR |
Oatly Group and Diageo PLC Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Oatly Group and Diageo PLC
The main advantage of trading using opposite Oatly Group and Diageo PLC positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Oatly Group 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.| Oatly Group vs. Monster Beverage Corp | Oatly Group vs. Vita Coco | Oatly Group vs. PepsiCo | Oatly Group vs. The Coca Cola |
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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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.
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