Correlation Between Diageo PLC and INTNED

Can any of the company-specific risk be diversified away by investing in both Diageo PLC and INTNED 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 INTNED 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 INTNED 14 01 JUL 26, you can compare the effects of market volatilities on Diageo PLC and INTNED 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 INTNED. Check out your portfolio center. Please also check ongoing floating volatility patterns of Diageo PLC and INTNED.

Diversification Opportunities for Diageo PLC and INTNED

-0.48

Correlation Coefficient

Diageo PLC  INTNED

Very good diversification

The 3 months correlation between Diageo and INTNED is -0.48. Overlapping area represents the amount of risk that can be diversified away by holding Diageo PLC ADR and INTNED 14 01 JUL 26 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on INTNED 14 01 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 INTNED. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of INTNED 14 01 has no effect on the direction of Diageo PLC i.e., Diageo PLC and INTNED go up and down completely randomly.

Pair Corralation between Diageo PLC and INTNED

Considering the 90-day investment horizon Diageo PLC ADR is expected to generate 0.53 times more return on investment than INTNED. However, Diageo PLC ADR is 1.89 times less risky than INTNED. It trades about 0.03 of its potential returns per unit of risk. INTNED 14 01 JUL 26 is currently generating about -0.04 per unit of risk. If you would invest  11,964  in Diageo PLC ADR on October 7, 2024 and sell it today you would earn a total of  174.00  from holding Diageo PLC ADR or generate 1.45% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	48.78%
Values	Daily Returns

Diageo PLC ADR  vs.  INTNED 14 01 JUL 26

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 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.

INTNED 14 01

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days INTNED 14 01 JUL 26 has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, INTNED is not utilizing all of its potentials. The recent stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Diageo PLC and INTNED

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

The idea behind Diageo PLC ADR and INTNED 14 01 JUL 26 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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.