Correlation Between Diageo PLC and MASSACHUSETTS

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

Diversification Opportunities for Diageo PLC and MASSACHUSETTS

-0.1

Correlation Coefficient

Diageo PLC  MASSACHUSETTS

Good diversification

The 3 months correlation between Diageo and MASSACHUSETTS is -0.1. Overlapping area represents the amount of risk that can be diversified away by holding Diageo PLC ADR and MASSACHUSETTS INST TECHNOLOGY in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on MASSACHUSETTS INST 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 MASSACHUSETTS. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of MASSACHUSETTS INST has no effect on the direction of Diageo PLC i.e., Diageo PLC and MASSACHUSETTS go up and down completely randomly.

Pair Corralation between Diageo PLC and MASSACHUSETTS

Considering the 90-day investment horizon Diageo PLC ADR is expected to generate 1.54 times more return on investment than MASSACHUSETTS. However, Diageo PLC is 1.54 times more volatile than MASSACHUSETTS INST TECHNOLOGY. It trades about -0.06 of its potential returns per unit of risk. MASSACHUSETTS INST TECHNOLOGY is currently generating about -0.13 per unit of risk. If you would invest  11,784  in Diageo PLC ADR on December 2, 2024 and sell it today you would lose (902.00) from holding Diageo PLC ADR or give up 7.65% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.36%
Values	Daily Returns

Diageo PLC ADR  vs.  MASSACHUSETTS INST TECHNOLOGY

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.

MASSACHUSETTS INST

Risk-Adjusted Performance

Very Weak

Over the last 90 days MASSACHUSETTS INST TECHNOLOGY has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Bond's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for MASSACHUSETTS INST TECHNOLOGY investors.

Pair Trading with Diageo PLC and MASSACHUSETTS

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

The idea behind Diageo PLC ADR and MASSACHUSETTS INST TECHNOLOGY 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 Portfolio Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.