Correlation Between Diageo PLC and Usio

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

Diversification Opportunities for Diageo PLC and Usio

-0.41

Correlation Coefficient

Diageo PLC  Usio

Very good diversification

The 3 months correlation between Diageo and Usio is -0.41. Overlapping area represents the amount of risk that can be diversified away by holding Diageo PLC ADR and Usio Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Usio Inc 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 Usio. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Usio Inc has no effect on the direction of Diageo PLC i.e., Diageo PLC and Usio go up and down completely randomly.

Pair Corralation between Diageo PLC and Usio

Considering the 90-day investment horizon Diageo PLC ADR is expected to under-perform the Usio. But the stock apears to be less risky and, when comparing its historical volatility, Diageo PLC ADR is 2.61 times less risky than Usio. The stock trades about -0.05 of its potential returns per unit of risk. The Usio Inc is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  186.00  in Usio Inc on October 22, 2024 and sell it today you would earn a total of  57.00  from holding Usio Inc or generate 30.65% return on investment over 90 days.

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

Diageo PLC ADR  vs.  Usio Inc

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 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 February 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

Usio Inc

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Usio Inc are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of very weak forward indicators, Usio displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Diageo PLC and Usio

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

The idea behind Diageo PLC ADR and Usio Inc 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 Money Managers module to screen money managers from public funds and ETFs managed around the world.