Correlation Between Cleantech Power and Diageo PLC
Can any of the company-specific risk be diversified away by investing in both Cleantech Power 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 Cleantech Power and Diageo PLC into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Cleantech Power Corp and Diageo PLC ADR, you can compare the effects of market volatilities on Cleantech Power 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 Cleantech Power with a short position of Diageo PLC. Check out your portfolio center. Please also check ongoing floating volatility patterns of Cleantech Power and Diageo PLC.
Diversification Opportunities for Cleantech Power and Diageo PLC
0.0 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between Cleantech and Diageo is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding Cleantech Power 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 Cleantech Power 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 Cleantech Power 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 Cleantech Power i.e., Cleantech Power and Diageo PLC go up and down completely randomly.
Pair Corralation between Cleantech Power and Diageo PLC
Assuming the 90 days horizon Cleantech Power Corp is expected to generate 69.65 times more return on investment than Diageo PLC. However, Cleantech Power is 69.65 times more volatile than Diageo PLC ADR. It trades about 0.11 of its potential returns per unit of risk. Diageo PLC ADR is currently generating about -0.03 per unit of risk. If you would invest 0.20 in Cleantech Power Corp on September 19, 2024 and sell it today you would earn a total of 0.39 from holding Cleantech Power Corp or generate 195.0% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Flat |
| Strength | Insignificant |
| Accuracy | 99.66% |
| Values | Daily Returns |
Cleantech Power Corp vs. Diageo PLC ADR
Performance |
| Timeline |
| Cleantech Power Corp |
| Diageo PLC ADR |
Cleantech Power and Diageo PLC Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Cleantech Power and Diageo PLC
The main advantage of trading using opposite Cleantech Power and Diageo PLC positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Cleantech Power 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.| Cleantech Power vs. First Ship Lease | Cleantech Power vs. Global Ship Lease | Cleantech Power vs. NetEase | Cleantech Power vs. NH Foods Ltd |
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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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.
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