Correlation Between Fidus Investment and Diageo PLC

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

By analyzing existing cross correlation between Fidus Investment Corp and Diageo PLC ADR, you can compare the effects of market volatilities on Fidus Investment and Diageo PLC 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 Fidus Investment with a short position of Diageo PLC. Check out your portfolio center. Please also check ongoing floating volatility patterns of Fidus Investment and Diageo PLC.

Diversification Opportunities for Fidus Investment and Diageo PLC

-0.48

Correlation Coefficient

Fidus Investment  Diageo PLC

Very good diversification

The 3 months correlation between Fidus and Diageo is -0.48. Overlapping area represents the amount of risk that can be diversified away by holding Fidus Investment Corp and Diageo PLC ADR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Diageo PLC ADR and Fidus Investment 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 Fidus Investment Corp are associated (or correlated) with Diageo PLC. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Diageo PLC ADR has no effect on the direction of Fidus Investment i.e., Fidus Investment and Diageo PLC go up and down completely randomly.

Pair Corralation between Fidus Investment and Diageo PLC

Given the investment horizon of 90 days Fidus Investment Corp is expected to generate 0.37 times more return on investment than Diageo PLC. However, Fidus Investment Corp is 2.7 times less risky than Diageo PLC. It trades about 0.41 of its potential returns per unit of risk. Diageo PLC ADR is currently generating about -0.15 per unit of risk. If you would invest  2,057  in Fidus Investment Corp on October 22, 2024 and sell it today you would earn a total of  113.00  from holding Fidus Investment Corp or generate 5.49% return on investment over 90 days.

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

Fidus Investment Corp  vs.  Diageo PLC ADR

Fidus Investment Corp

Risk-Adjusted Performance

20 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Fidus Investment Corp are ranked lower than 20 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unsteady basic indicators, Fidus Investment unveiled solid returns over the last few months and may actually be approaching a breakup point.

Diageo PLC ADR

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Diageo PLC ADR has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's technical and fundamental indicators remain very healthy which may send shares a bit higher in February 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

Pair Trading with Fidus Investment and Diageo PLC

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

The idea behind Fidus Investment Corp and Diageo PLC ADR 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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.