Correlation Between Diageo Plc and Tinley Beverage

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

Diversification Opportunities for Diageo Plc and Tinley Beverage

0.25

Correlation Coefficient

Diageo Plc  Tinley Beverage

Modest diversification

The 3 months correlation between Diageo and Tinley is 0.25. Overlapping area represents the amount of risk that can be diversified away by holding Diageo plc and The Tinley Beverage in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Tinley Beverage 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 Tinley Beverage. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Tinley Beverage has no effect on the direction of Diageo Plc i.e., Diageo Plc and Tinley Beverage go up and down completely randomly.

Pair Corralation between Diageo Plc and Tinley Beverage

Assuming the 90 days horizon Diageo plc is expected to under-perform the Tinley Beverage. But the pink sheet apears to be less risky and, when comparing its historical volatility, Diageo plc is 5.79 times less risky than Tinley Beverage. The pink sheet trades about 0.0 of its potential returns per unit of risk. The The Tinley Beverage is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  2.60  in The Tinley Beverage on October 20, 2024 and sell it today you would lose (0.50) from holding The Tinley Beverage or give up 19.23% of portfolio value over 90 days.

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

Diageo plc  vs.  The Tinley Beverage

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

Tinley Beverage

Risk-Adjusted Performance

3 of 100

Insignificant

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

Pair Trading with Diageo Plc and Tinley Beverage

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

The idea behind Diageo plc and The Tinley Beverage 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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.