Correlation Between Diageo Plc and Vodka Brands

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

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

Diversification Opportunities for Diageo Plc and Vodka Brands

0.0

Correlation Coefficient

Diageo Plc  Vodka Brands

Pay attention - limited upside

The 3 months correlation between Diageo and Vodka is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding Diageo plc and Vodka Brands Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vodka Brands Corp 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 Vodka Brands. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vodka Brands Corp has no effect on the direction of Diageo Plc i.e., Diageo Plc and Vodka Brands go up and down completely randomly.

Pair Corralation between Diageo Plc and Vodka Brands

Assuming the 90 days horizon Diageo plc is expected to under-perform the Vodka Brands. But the pink sheet apears to be less risky and, when comparing its historical volatility, Diageo plc is 1.26 times less risky than Vodka Brands. The pink sheet trades about -0.12 of its potential returns per unit of risk. The Vodka Brands Corp is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  107.00  in Vodka Brands Corp on December 28, 2024 and sell it today you would earn a total of  7.00  from holding Vodka Brands Corp or generate 6.54% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	95.16%
Values	Daily Returns

Diageo plc  vs.  Vodka Brands Corp

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.

Vodka Brands Corp

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Vodka Brands Corp are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak forward-looking signals, Vodka Brands may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Diageo Plc and Vodka Brands

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

The idea behind Diageo plc and Vodka Brands Corp 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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.