Correlation Between WT Offshore and Diageo PLC
Can any of the company-specific risk be diversified away by investing in both WT Offshore 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 WT Offshore and Diageo PLC into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between WT Offshore and Diageo PLC ADR, you can compare the effects of market volatilities on WT Offshore 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 WT Offshore with a short position of Diageo PLC. Check out your portfolio center. Please also check ongoing floating volatility patterns of WT Offshore and Diageo PLC.
Diversification Opportunities for WT Offshore and Diageo PLC
0.33 | Correlation Coefficient |
Weak diversification
The 3 months correlation between WTI and Diageo is 0.33. Overlapping area represents the amount of risk that can be diversified away by holding WT Offshore 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 WT Offshore 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 WT Offshore 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 WT Offshore i.e., WT Offshore and Diageo PLC go up and down completely randomly.
Pair Corralation between WT Offshore and Diageo PLC
Considering the 90-day investment horizon WT Offshore is expected to under-perform the Diageo PLC. In addition to that, WT Offshore is 2.26 times more volatile than Diageo PLC ADR. It trades about -0.05 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 16,228 in Diageo PLC ADR on August 31, 2024 and sell it today you would lose (4,292) from holding Diageo PLC ADR or give up 26.45% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
WT Offshore vs. Diageo PLC ADR
Performance |
| Timeline |
| WT Offshore |
| Diageo PLC ADR |
WT Offshore and Diageo PLC Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with WT Offshore and Diageo PLC
The main advantage of trading using opposite WT Offshore and Diageo PLC positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if WT Offshore 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.| WT Offshore vs. Evolution Petroleum | WT Offshore vs. Ring Energy | WT Offshore vs. Gran Tierra Energy | WT Offshore vs. Permian Resources |
| Diageo PLC vs. Naked Wines plc | Diageo PLC vs. Andrew Peller Limited | Diageo PLC vs. Iconic Brands | Diageo PLC vs. Naked Wines plc |
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 Global Correlations module to find global opportunities by holding instruments from different markets.
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