Correlation Between Diageo PLC and AlphaTime Acquisition

Can any of the company-specific risk be diversified away by investing in both Diageo PLC and AlphaTime Acquisition 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 AlphaTime Acquisition 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 AlphaTime Acquisition Corp, you can compare the effects of market volatilities on Diageo PLC and AlphaTime Acquisition 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 AlphaTime Acquisition. Check out your portfolio center. Please also check ongoing floating volatility patterns of Diageo PLC and AlphaTime Acquisition.

Diversification Opportunities for Diageo PLC and AlphaTime Acquisition

-0.4

Correlation Coefficient

Diageo PLC  AlphaTime Acquisition

Very good diversification

The 3 months correlation between Diageo and AlphaTime is -0.4. Overlapping area represents the amount of risk that can be diversified away by holding Diageo PLC ADR and AlphaTime Acquisition Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AlphaTime Acquisition 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 AlphaTime Acquisition. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of AlphaTime Acquisition has no effect on the direction of Diageo PLC i.e., Diageo PLC and AlphaTime Acquisition go up and down completely randomly.

Pair Corralation between Diageo PLC and AlphaTime Acquisition

Considering the 90-day investment horizon Diageo PLC is expected to generate 130.67 times less return on investment than AlphaTime Acquisition. But when comparing it to its historical volatility, Diageo PLC ADR is 16.83 times less risky than AlphaTime Acquisition. It trades about 0.03 of its potential returns per unit of risk. AlphaTime Acquisition Corp is currently generating about 0.24 of returns per unit of risk over similar time horizon. If you would invest  15.00  in AlphaTime Acquisition Corp on October 11, 2024 and sell it today you would earn a total of  6.00  from holding AlphaTime Acquisition Corp or generate 40.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	42.86%
Values	Daily Returns

Diageo PLC ADR  vs.  AlphaTime Acquisition Corp

Diageo PLC ADR

Risk-Adjusted Performance

0 of 100

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.

AlphaTime Acquisition

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in AlphaTime Acquisition Corp are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Even with relatively uncertain fundamental indicators, AlphaTime Acquisition reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Diageo PLC and AlphaTime Acquisition

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

The idea behind Diageo PLC ADR and AlphaTime Acquisition Corp 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 Portfolio Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.