Correlation Between Diageo PLC and Heritage Distilling

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

Diversification Opportunities for Diageo PLC and Heritage Distilling

0.71

Correlation Coefficient

Diageo PLC  Heritage Distilling

Poor diversification

The 3 months correlation between Diageo and Heritage is 0.71. Overlapping area represents the amount of risk that can be diversified away by holding Diageo PLC ADR and Heritage Distilling Holding in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Heritage Distilling 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 Heritage Distilling. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Heritage Distilling has no effect on the direction of Diageo PLC i.e., Diageo PLC and Heritage Distilling go up and down completely randomly.

Pair Corralation between Diageo PLC and Heritage Distilling

Considering the 90-day investment horizon Diageo PLC ADR is expected to generate 0.24 times more return on investment than Heritage Distilling. However, Diageo PLC ADR is 4.13 times less risky than Heritage Distilling. It trades about -0.14 of its potential returns per unit of risk. Heritage Distilling Holding is currently generating about -0.23 per unit of risk. If you would invest  12,481  in Diageo PLC ADR on December 28, 2024 and sell it today you would lose (1,929) from holding Diageo PLC ADR or give up 15.46% of portfolio value over 90 days.

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

Diageo PLC ADR  vs.  Heritage Distilling Holding

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.

Heritage Distilling

Risk-Adjusted Performance

Very Weak

Over the last 90 days Heritage Distilling Holding has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain quite persistent which may send shares a bit higher in April 2025. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

Pair Trading with Diageo PLC and Heritage Distilling

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

The idea behind Diageo PLC ADR and Heritage Distilling Holding 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 Bond Analysis module to evaluate and analyze corporate bonds as a potential investment for your portfolios..