Correlation Between Diageo PLC and GEN Restaurant

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

Diversification Opportunities for Diageo PLC and GEN Restaurant

-0.19

Correlation Coefficient

Diageo PLC  GEN Restaurant

Good diversification

The 3 months correlation between Diageo and GEN is -0.19. Overlapping area represents the amount of risk that can be diversified away by holding Diageo PLC ADR and GEN Restaurant Group, in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on GEN Restaurant 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 GEN Restaurant. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of GEN Restaurant Group, has no effect on the direction of Diageo PLC i.e., Diageo PLC and GEN Restaurant go up and down completely randomly.

Pair Corralation between Diageo PLC and GEN Restaurant

Considering the 90-day investment horizon Diageo PLC ADR is expected to under-perform the GEN Restaurant. But the stock apears to be less risky and, when comparing its historical volatility, Diageo PLC ADR is 3.16 times less risky than GEN Restaurant. The stock trades about -0.02 of its potential returns per unit of risk. The GEN Restaurant Group, is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest  717.00  in GEN Restaurant Group, on September 21, 2024 and sell it today you would earn a total of  21.00  from holding GEN Restaurant Group, or generate 2.93% return on investment over 90 days.

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

Diageo PLC ADR  vs.  GEN Restaurant Group,

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 very healthy technical and fundamental indicators, Diageo PLC is not utilizing all of its potentials. The current stock price disarray, may contribute to short-term losses for the investors.

GEN Restaurant Group,

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days GEN Restaurant Group, has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent basic indicators, GEN Restaurant is not utilizing all of its potentials. The current stock price mess, may contribute to short-term losses for the institutional investors.

Pair Trading with Diageo PLC and GEN Restaurant

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

The idea behind Diageo PLC ADR and GEN Restaurant 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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.