Correlation Between Altia Oyj and Diageo Plc

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

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

Diversification Opportunities for Altia Oyj and Diageo Plc

0.58

Correlation Coefficient

Altia Oyj  Diageo Plc

Very weak diversification

The 3 months correlation between Altia and Diageo is 0.58. Overlapping area represents the amount of risk that can be diversified away by holding Altia Oyj and Diageo plc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Diageo plc and Altia Oyj 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 Altia Oyj 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 Altia Oyj i.e., Altia Oyj and Diageo Plc go up and down completely randomly.

Pair Corralation between Altia Oyj and Diageo Plc

Assuming the 90 days horizon Altia Oyj is expected to under-perform the Diageo Plc. In addition to that, Altia Oyj is 1.25 times more volatile than Diageo plc. It trades about -0.21 of its total potential returns per unit of risk. Diageo plc is currently generating about 0.02 per unit of volatility. If you would invest  2,992  in Diageo plc on September 22, 2024 and sell it today you would earn a total of  46.00  from holding Diageo plc or generate 1.54% return on investment over 90 days.

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

Altia Oyj  vs.  Diageo plc

Altia Oyj

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Altia Oyj has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fragile performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Diageo plc

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Diageo plc are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, Diageo Plc is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Altia Oyj and Diageo Plc

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

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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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.