Correlation Between PGE Corp and Diageo PLC
Can any of the company-specific risk be diversified away by investing in both PGE 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 PGE 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 PGE Corp and Diageo PLC ADR, you can compare the effects of market volatilities on PGE 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 PGE Corp with a short position of Diageo PLC. Check out your portfolio center. Please also check ongoing floating volatility patterns of PGE Corp and Diageo PLC.
Diversification Opportunities for PGE Corp and Diageo PLC
-0.66 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between PGE and Diageo is -0.66. Overlapping area represents the amount of risk that can be diversified away by holding PGE 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 PGE 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 PGE 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 PGE Corp i.e., PGE Corp and Diageo PLC go up and down completely randomly.
Pair Corralation between PGE Corp and Diageo PLC
Considering the 90-day investment horizon PGE Corp is expected to generate 0.88 times more return on investment than Diageo PLC. However, PGE Corp is 1.14 times less risky than Diageo PLC. It trades about 0.21 of its potential returns per unit of risk. Diageo PLC ADR is currently generating about -0.33 per unit of risk. If you would invest 1,977 in PGE Corp on August 30, 2024 and sell it today you would earn a total of 186.00 from holding PGE Corp or generate 9.41% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
PGE Corp vs. Diageo PLC ADR
Performance |
| Timeline |
| PGE Corp |
| Diageo PLC ADR |
PGE Corp and Diageo PLC Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with PGE Corp and Diageo PLC
The main advantage of trading using opposite PGE Corp and Diageo PLC positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if PGE 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.| PGE Corp vs. DTE Energy | PGE Corp vs. Ameren Corp | PGE Corp vs. CenterPoint Energy | PGE Corp vs. Pinnacle West Capital |
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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 Dashboard module to portfolio dashboard that provides centralized access to all your investments.
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