Correlation Between Materialise and Diageo Plc

Can any of the company-specific risk be diversified away by investing in both Materialise 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 Materialise and Diageo Plc into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Materialise NV and Diageo plc, you can compare the effects of market volatilities on Materialise 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 Materialise with a short position of Diageo Plc. Check out your portfolio center. Please also check ongoing floating volatility patterns of Materialise and Diageo Plc.

Diversification Opportunities for Materialise and Diageo Plc

-0.36

Correlation Coefficient

Materialise  Diageo Plc

Very good diversification

The 3 months correlation between Materialise and Diageo is -0.36. Overlapping area represents the amount of risk that can be diversified away by holding Materialise NV and Diageo plc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Diageo plc and Materialise 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 Materialise NV 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 has no effect on the direction of Materialise i.e., Materialise and Diageo Plc go up and down completely randomly.

Pair Corralation between Materialise and Diageo Plc

Assuming the 90 days trading horizon Materialise NV is expected to generate 2.88 times more return on investment than Diageo Plc. However, Materialise is 2.88 times more volatile than Diageo plc. It trades about 0.19 of its potential returns per unit of risk. Diageo plc is currently generating about -0.07 per unit of risk. If you would invest  464.00  in Materialise NV on October 24, 2024 and sell it today you would earn a total of  281.00  from holding Materialise NV or generate 60.56% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

Materialise NV  vs.  Diageo plc

Materialise NV

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Materialise NV are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unsteady basic indicators, Materialise unveiled solid returns over the last few months and may actually be approaching a breakup point.

Diageo plc

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Diageo plc has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest fragile performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Pair Trading with Materialise and Diageo Plc

The main advantage of trading using opposite Materialise and Diageo Plc positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Materialise 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.

The idea behind Materialise NV and Diageo plc pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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 USA ETFs module to find actively traded Exchange Traded Funds (ETF) in USA.