Correlation Between Diageo PLC and Andrew Peller

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

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

Diversification Opportunities for Diageo PLC and Andrew Peller

-0.73

Correlation Coefficient

Diageo PLC  Andrew Peller

Pay attention - limited upside

The 3 months correlation between Diageo and Andrew is -0.73. Overlapping area represents the amount of risk that can be diversified away by holding Diageo PLC ADR and Andrew Peller Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Andrew Peller Limited and Diageo PLC 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 Diageo PLC ADR are associated (or correlated) with Andrew Peller. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Andrew Peller Limited has no effect on the direction of Diageo PLC i.e., Diageo PLC and Andrew Peller go up and down completely randomly.

Pair Corralation between Diageo PLC and Andrew Peller

Considering the 90-day investment horizon Diageo PLC ADR is expected to under-perform the Andrew Peller. But the stock apears to be less risky and, when comparing its historical volatility, Diageo PLC ADR is 1.52 times less risky than Andrew Peller. The stock trades about -0.07 of its potential returns per unit of risk. The Andrew Peller Limited is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest  283.00  in Andrew Peller Limited on December 2, 2024 and sell it today you would earn a total of  77.00  from holding Andrew Peller Limited or generate 27.21% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	40.49%
Values	Daily Returns

Diageo PLC ADR  vs.  Andrew Peller Limited

Diageo PLC ADR

Risk-Adjusted Performance

Very Weak

Over the last 90 days Diageo PLC ADR has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest weak performance, the Stock's technical and fundamental indicators remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the firm investors.

Andrew Peller Limited

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Andrew Peller Limited are ranked lower than 19 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Andrew Peller reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Diageo PLC and Andrew Peller

The main advantage of trading using opposite Diageo PLC and Andrew Peller positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Diageo PLC position performs unexpectedly, Andrew Peller 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 Andrew Peller will offset losses from the drop in Andrew Peller's long position.

The idea behind Diageo PLC ADR and Andrew Peller Limited 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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.