Correlation Between Diageo PLC and Binah Capital

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

Diversification Opportunities for Diageo PLC and Binah Capital

0.34

Correlation Coefficient

Diageo PLC  Binah Capital

Weak diversification

The 3 months correlation between Diageo and Binah is 0.34. Overlapping area represents the amount of risk that can be diversified away by holding Diageo PLC ADR and Binah Capital Group, in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Binah Capital Group, 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 Binah Capital. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Binah Capital Group, has no effect on the direction of Diageo PLC i.e., Diageo PLC and Binah Capital go up and down completely randomly.

Pair Corralation between Diageo PLC and Binah Capital

Considering the 90-day investment horizon Diageo PLC ADR is expected to under-perform the Binah Capital. But the stock apears to be less risky and, when comparing its historical volatility, Diageo PLC ADR is 6.48 times less risky than Binah Capital. The stock trades about -0.1 of its potential returns per unit of risk. The Binah Capital Group, is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest  252.00  in Binah Capital Group, on December 18, 2024 and sell it today you would lose (68.00) from holding Binah Capital Group, or give up 26.98% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	98.33%
Values	Daily Returns

Diageo PLC ADR  vs.  Binah Capital Group,

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.

Binah Capital Group,

Risk-Adjusted Performance

Very Weak

Over the last 90 days Binah Capital Group, has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable fundamental indicators, Binah Capital is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Diageo PLC and Binah Capital

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

The idea behind Diageo PLC ADR and Binah Capital Group, 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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.