Correlation Between Pinterest and Diageo PLC
Can any of the company-specific risk be diversified away by investing in both Pinterest 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 Pinterest and Diageo PLC into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Pinterest and Diageo PLC ADR, you can compare the effects of market volatilities on Pinterest 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 Pinterest with a short position of Diageo PLC. Check out your portfolio center. Please also check ongoing floating volatility patterns of Pinterest and Diageo PLC.
Diversification Opportunities for Pinterest and Diageo PLC
0.46 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Pinterest and Diageo is 0.46. Overlapping area represents the amount of risk that can be diversified away by holding Pinterest 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 Pinterest 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 Pinterest 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 Pinterest i.e., Pinterest and Diageo PLC go up and down completely randomly.
Pair Corralation between Pinterest and Diageo PLC
Given the investment horizon of 90 days Pinterest is expected to generate 1.95 times more return on investment than Diageo PLC. However, Pinterest is 1.95 times more volatile than Diageo PLC ADR. It trades about 0.04 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 2,521 in Pinterest on September 12, 2024 and sell it today you would earn a total of 662.00 from holding Pinterest or generate 26.26% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Pinterest vs. Diageo PLC ADR
Performance |
| Timeline |
| Diageo PLC ADR |
Pinterest and Diageo PLC Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Pinterest and Diageo PLC
The main advantage of trading using opposite Pinterest and Diageo PLC positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Pinterest 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.| Pinterest vs. Twilio Inc | Pinterest vs. Meta Platforms | Pinterest vs. Alphabet Inc Class C | Pinterest vs. Alphabet Inc Class A |
| Diageo PLC vs. Andrew Peller Limited | Diageo PLC vs. Naked Wines plc | Diageo PLC vs. Willamette Valley Vineyards | Diageo PLC vs. Splash Beverage Group |
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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.
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