Correlation Between Diageo Plc and Thai Beverage

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

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

Diversification Opportunities for Diageo Plc and Thai Beverage

0.18

Correlation Coefficient

Diageo Plc  Thai Beverage

Average diversification

The 3 months correlation between Diageo and Thai is 0.18. Overlapping area represents the amount of risk that can be diversified away by holding Diageo plc and Thai Beverage Public in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Thai Beverage Public 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 Thai Beverage. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Thai Beverage Public has no effect on the direction of Diageo Plc i.e., Diageo Plc and Thai Beverage go up and down completely randomly.

Pair Corralation between Diageo Plc and Thai Beverage

Assuming the 90 days horizon Diageo plc is expected to under-perform the Thai Beverage. But the pink sheet apears to be less risky and, when comparing its historical volatility, Diageo plc is 2.99 times less risky than Thai Beverage. The pink sheet trades about -0.06 of its potential returns per unit of risk. The Thai Beverage Public is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  40.00  in Thai Beverage Public on September 3, 2024 and sell it today you would earn a total of  1.00  from holding Thai Beverage Public or generate 2.5% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

Diageo plc  vs.  Thai Beverage Public

Diageo plc

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Diageo plc has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest unfluctuating performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Thai Beverage Public

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Thai Beverage Public are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Thai Beverage reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Diageo Plc and Thai Beverage

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

The idea behind Diageo plc and Thai Beverage Public 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 Stock Screener module to find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook..