Correlation Between UET United and Diageo PLC

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

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

Diversification Opportunities for UET United and Diageo PLC

-0.2

Correlation Coefficient

UET United  Diageo PLC

Good diversification

The 3 months correlation between UET and Diageo is -0.2. Overlapping area represents the amount of risk that can be diversified away by holding UET United Electronic and Diageo PLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Diageo PLC and UET United 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 UET United Electronic 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 UET United i.e., UET United and Diageo PLC go up and down completely randomly.

Pair Corralation between UET United and Diageo PLC

Assuming the 90 days trading horizon UET United Electronic is expected to generate 2.76 times more return on investment than Diageo PLC. However, UET United is 2.76 times more volatile than Diageo PLC. It trades about 0.04 of its potential returns per unit of risk. Diageo PLC is currently generating about -0.18 per unit of risk. If you would invest  88.00  in UET United Electronic on December 22, 2024 and sell it today you would earn a total of  5.00  from holding UET United Electronic or generate 5.68% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.36%
Values	Daily Returns

UET United Electronic  vs.  Diageo PLC

UET United Electronic

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in UET United Electronic are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively fragile fundamental indicators, UET United may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Diageo PLC

Risk-Adjusted Performance

Very Weak

Over the last 90 days Diageo PLC has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fragile performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in April 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Pair Trading with UET United and Diageo PLC

The main advantage of trading using opposite UET United and Diageo PLC positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if UET United 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 UET United Electronic 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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.