Correlation Between Diageo PLC and Hamilton Insurance

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

Diversification Opportunities for Diageo PLC and Hamilton Insurance

0.3

Correlation Coefficient

Diageo PLC  Hamilton Insurance

Weak diversification

The 3 months correlation between Diageo and Hamilton is 0.3. Overlapping area represents the amount of risk that can be diversified away by holding Diageo PLC ADR and Hamilton Insurance Group, in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hamilton Insurance 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 Hamilton Insurance. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hamilton Insurance Group, has no effect on the direction of Diageo PLC i.e., Diageo PLC and Hamilton Insurance go up and down completely randomly.

Pair Corralation between Diageo PLC and Hamilton Insurance

Considering the 90-day investment horizon Diageo PLC ADR is expected to under-perform the Hamilton Insurance. But the stock apears to be less risky and, when comparing its historical volatility, Diageo PLC ADR is 1.05 times less risky than Hamilton Insurance. The stock trades about -0.24 of its potential returns per unit of risk. The Hamilton Insurance Group, is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  1,913  in Hamilton Insurance Group, on December 2, 2024 and sell it today you would earn a total of  43.00  from holding Hamilton Insurance Group, or generate 2.25% return on investment over 90 days.

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

Diageo PLC ADR  vs.  Hamilton Insurance 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.

Hamilton Insurance Group,

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Hamilton Insurance Group, are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable technical and fundamental indicators, Hamilton Insurance 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 Hamilton Insurance

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

The idea behind Diageo PLC ADR and Hamilton Insurance 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 ETF Categories module to list of ETF categories grouped based on various criteria, such as the investment strategy or type of investments.