Correlation Between Diageo PLC and Supply@Me Capital

Can any of the company-specific risk be diversified away by investing in both Diageo PLC and Supply@Me Capital 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 Supply@Me Capital into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Diageo PLC and SupplyMe Capital PLC, you can compare the effects of market volatilities on Diageo PLC and Supply@Me Capital 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 Supply@Me Capital. Check out your portfolio center. Please also check ongoing floating volatility patterns of Diageo PLC and Supply@Me Capital.

Diversification Opportunities for Diageo PLC and Supply@Me Capital

0.08

Correlation Coefficient

Diageo PLC  Supply@Me Capital

Significant diversification

The 3 months correlation between Diageo and Supply@Me is 0.08. Overlapping area represents the amount of risk that can be diversified away by holding Diageo PLC and SupplyMe Capital PLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SupplyMe Capital PLC 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 are associated (or correlated) with Supply@Me Capital. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SupplyMe Capital PLC has no effect on the direction of Diageo PLC i.e., Diageo PLC and Supply@Me Capital go up and down completely randomly.

Pair Corralation between Diageo PLC and Supply@Me Capital

Assuming the 90 days trading horizon Diageo PLC is expected to generate 0.12 times more return on investment than Supply@Me Capital. However, Diageo PLC is 8.32 times less risky than Supply@Me Capital. It trades about -0.06 of its potential returns per unit of risk. SupplyMe Capital PLC is currently generating about -0.03 per unit of risk. If you would invest  318,350  in Diageo PLC on December 5, 2024 and sell it today you would lose (104,050) from holding Diageo PLC or give up 32.68% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	99.75%
Values	Daily Returns

Diageo PLC  vs.  SupplyMe Capital PLC

Diageo PLC

Risk-Adjusted Performance

Very Weak

Over the last 90 days Diageo PLC has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unsteady performance, the Stock's technical and fundamental indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

SupplyMe Capital PLC

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in SupplyMe Capital PLC are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Supply@Me Capital unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Diageo PLC and Supply@Me Capital

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

The idea behind Diageo PLC and SupplyMe Capital PLC 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 Stocks Directory module to find actively traded stocks across global markets.