Correlation Between Diageo PLC and Virtus Investment

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

Diversification Opportunities for Diageo PLC and Virtus Investment

-0.78

Correlation Coefficient

Diageo PLC  Virtus Investment

Pay attention - limited upside

The 3 months correlation between Diageo and Virtus is -0.78. Overlapping area represents the amount of risk that can be diversified away by holding Diageo PLC ADR and Virtus Investment Partners, in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Virtus Investment 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 Virtus Investment. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Virtus Investment has no effect on the direction of Diageo PLC i.e., Diageo PLC and Virtus Investment go up and down completely randomly.

Pair Corralation between Diageo PLC and Virtus Investment

Considering the 90-day investment horizon Diageo PLC ADR is expected to generate 0.96 times more return on investment than Virtus Investment. However, Diageo PLC ADR is 1.05 times less risky than Virtus Investment. It trades about 0.03 of its potential returns per unit of risk. Virtus Investment Partners, is currently generating about -0.13 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	Weak
Accuracy	100.0%
Values	Daily Returns

Diageo PLC ADR  vs.  Virtus Investment Partners,

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.

Virtus Investment

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Virtus Investment Partners, are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively inconsistent basic indicators, Virtus Investment may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Diageo PLC and Virtus Investment

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

The idea behind Diageo PLC ADR and Virtus Investment Partners, 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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.