Correlation Between Willamette Valley and Diageo PLC
Can any of the company-specific risk be diversified away by investing in both Willamette Valley 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 Willamette Valley and Diageo PLC into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Willamette Valley Vineyards and Diageo PLC ADR, you can compare the effects of market volatilities on Willamette Valley 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 Willamette Valley with a short position of Diageo PLC. Check out your portfolio center. Please also check ongoing floating volatility patterns of Willamette Valley and Diageo PLC.
Diversification Opportunities for Willamette Valley and Diageo PLC
0.39 | Correlation Coefficient |
Weak diversification
The 3 months correlation between Willamette and Diageo is 0.39. Overlapping area represents the amount of risk that can be diversified away by holding Willamette Valley Vineyards 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 Willamette Valley 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 Willamette Valley Vineyards 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 Willamette Valley i.e., Willamette Valley and Diageo PLC go up and down completely randomly.
Pair Corralation between Willamette Valley and Diageo PLC
Given the investment horizon of 90 days Willamette Valley Vineyards is expected to under-perform the Diageo PLC. In addition to that, Willamette Valley is 1.6 times more volatile than Diageo PLC ADR. It trades about -0.07 of its total potential returns per unit of risk. Diageo PLC ADR is currently generating about -0.03 per unit of volatility. If you would invest 12,896 in Diageo PLC ADR on August 27, 2024 and sell it today you would lose (857.00) from holding Diageo PLC ADR or give up 6.65% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Willamette Valley Vineyards vs. Diageo PLC ADR
Performance |
| Timeline |
| Willamette Valley |
| Diageo PLC ADR |
Willamette Valley and Diageo PLC Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Willamette Valley and Diageo PLC
The main advantage of trading using opposite Willamette Valley and Diageo PLC positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Willamette Valley 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.| Willamette Valley vs. Naked Wines plc | Willamette Valley vs. Andrew Peller Limited | Willamette Valley vs. Iconic Brands | Willamette Valley vs. Naked Wines plc |
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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 Equity Valuation module to check real value of public entities based on technical and fundamental data.
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