Correlation Between Diageo PLC and Roadzen

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

Diversification Opportunities for Diageo PLC and Roadzen

0.2

Correlation Coefficient

Diageo PLC  Roadzen

Modest diversification

The 3 months correlation between Diageo and Roadzen is 0.2. Overlapping area represents the amount of risk that can be diversified away by holding Diageo PLC ADR and Roadzen in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Roadzen 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 Roadzen. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Roadzen has no effect on the direction of Diageo PLC i.e., Diageo PLC and Roadzen go up and down completely randomly.

Pair Corralation between Diageo PLC and Roadzen

Considering the 90-day investment horizon Diageo PLC ADR is expected to generate 0.15 times more return on investment than Roadzen. However, Diageo PLC ADR is 6.74 times less risky than Roadzen. It trades about -0.12 of its potential returns per unit of risk. Roadzen is currently generating about -0.1 per unit of risk. If you would invest  12,360  in Diageo PLC ADR on December 20, 2024 and sell it today you would lose (1,660) from holding Diageo PLC ADR or give up 13.43% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	83.33%
Values	Daily Returns

Diageo PLC ADR  vs.  Roadzen

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.

Roadzen

Risk-Adjusted Performance

Very Weak

Over the last 90 days Roadzen 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 basic indicators remain fairly stable which may send shares a bit higher in April 2025. The latest fuss may also be a sign of long-term up-swing for the venture sophisticated investors.

Pair Trading with Diageo PLC and Roadzen

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

The idea behind Diageo PLC ADR and Roadzen 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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.