Correlation Between Diageo PLC and BCB Bancorp

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

Diversification Opportunities for Diageo PLC and BCB Bancorp

0.82

Correlation Coefficient

Diageo PLC  BCB Bancorp

Very poor diversification

The 3 months correlation between Diageo and BCB is 0.82. Overlapping area represents the amount of risk that can be diversified away by holding Diageo PLC ADR and BCB Bancorp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BCB Bancorp 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 BCB Bancorp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BCB Bancorp has no effect on the direction of Diageo PLC i.e., Diageo PLC and BCB Bancorp go up and down completely randomly.

Pair Corralation between Diageo PLC and BCB Bancorp

Considering the 90-day investment horizon Diageo PLC ADR is expected to under-perform the BCB Bancorp. But the stock apears to be less risky and, when comparing its historical volatility, Diageo PLC ADR is 1.08 times less risky than BCB Bancorp. The stock trades about -0.14 of its potential returns per unit of risk. The BCB Bancorp is currently generating about -0.09 of returns per unit of risk over similar time horizon. If you would invest  1,149  in BCB Bancorp on December 27, 2024 and sell it today you would lose (135.00) from holding BCB Bancorp or give up 11.75% of portfolio value over 90 days.

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

Diageo PLC ADR  vs.  BCB Bancorp

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 weak performance in the last few months, the Stock's technical and fundamental indicators remain very healthy which may send shares a bit higher in April 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

BCB Bancorp

Risk-Adjusted Performance

Very Weak

Over the last 90 days BCB Bancorp has generated negative risk-adjusted returns adding no value to investors with long positions. Even with latest uncertain performance, the Stock's fundamental drivers remain invariable and the latest agitation on Wall Street may also be a sign of long-running gains for the enterprise retail investors.

Pair Trading with Diageo PLC and BCB Bancorp

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

The idea behind Diageo PLC ADR and BCB Bancorp 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.