Correlation Between Diageo Plc and Davide Campari-Milano

Can any of the company-specific risk be diversified away by investing in both Diageo Plc and Davide Campari-Milano 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 Davide Campari-Milano into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Diageo plc and Davide Campari Milano NV, you can compare the effects of market volatilities on Diageo Plc and Davide Campari-Milano 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 Davide Campari-Milano. Check out your portfolio center. Please also check ongoing floating volatility patterns of Diageo Plc and Davide Campari-Milano.

Diversification Opportunities for Diageo Plc and Davide Campari-Milano

0.02

Correlation Coefficient

Diageo Plc  Davide Campari-Milano

Significant diversification

The 3 months correlation between Diageo and Davide is 0.02. Overlapping area represents the amount of risk that can be diversified away by holding Diageo plc and Davide Campari Milano NV in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Davide Campari Milano 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 Davide Campari-Milano. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Davide Campari Milano has no effect on the direction of Diageo Plc i.e., Diageo Plc and Davide Campari-Milano go up and down completely randomly.

Pair Corralation between Diageo Plc and Davide Campari-Milano

Assuming the 90 days horizon Diageo plc is expected to under-perform the Davide Campari-Milano. But the pink sheet apears to be less risky and, when comparing its historical volatility, Diageo plc is 1.2 times less risky than Davide Campari-Milano. The pink sheet trades about -0.12 of its potential returns per unit of risk. The Davide Campari Milano NV is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest  625.00  in Davide Campari Milano NV on December 29, 2024 and sell it today you would lose (5.00) from holding Davide Campari Milano NV or give up 0.8% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	96.72%
Values	Daily Returns

Diageo plc  vs.  Davide Campari Milano NV

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. Despite weak performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Davide Campari Milano

Risk-Adjusted Performance

Very Weak

Over the last 90 days Davide Campari Milano NV has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable fundamental indicators, Davide Campari-Milano is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Diageo Plc and Davide Campari-Milano

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

The idea behind Diageo plc and Davide Campari Milano NV 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 Global Markets Map module to get a quick overview of global market snapshot using zoomable world map. Drill down to check world indexes.