Correlation Between EVS Broadcast and Diageo Plc

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

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

Diversification Opportunities for EVS Broadcast and Diageo Plc

0.28

Correlation Coefficient

EVS Broadcast  Diageo Plc

Modest diversification

The 3 months correlation between EVS and Diageo is 0.28. Overlapping area represents the amount of risk that can be diversified away by holding EVS Broadcast Equipment and Diageo plc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Diageo plc and EVS Broadcast 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 EVS Broadcast Equipment 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 EVS Broadcast i.e., EVS Broadcast and Diageo Plc go up and down completely randomly.

Pair Corralation between EVS Broadcast and Diageo Plc

Assuming the 90 days trading horizon EVS Broadcast Equipment is expected to generate 0.92 times more return on investment than Diageo Plc. However, EVS Broadcast Equipment is 1.09 times less risky than Diageo Plc. It trades about 0.05 of its potential returns per unit of risk. Diageo plc is currently generating about 0.03 per unit of risk. If you would invest  2,854  in EVS Broadcast Equipment on October 4, 2024 and sell it today you would earn a total of  226.00  from holding EVS Broadcast Equipment or generate 7.92% return on investment over 90 days.

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

EVS Broadcast Equipment  vs.  Diageo plc

EVS Broadcast Equipment

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in EVS Broadcast Equipment are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively fragile basic indicators, EVS Broadcast may actually be approaching a critical reversion point that can send shares even higher in February 2025.

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 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 EVS Broadcast and Diageo Plc

The main advantage of trading using opposite EVS Broadcast and Diageo Plc positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if EVS Broadcast 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 EVS Broadcast Equipment 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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.