Correlation Between Funko and Diageo PLC

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

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

Diversification Opportunities for Funko and Diageo PLC

0.7

Correlation Coefficient

Funko  Diageo PLC

Poor diversification

The 3 months correlation between Funko and Diageo is 0.7. Overlapping area represents the amount of risk that can be diversified away by holding Funko Inc 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 Funko 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 Funko Inc 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 Funko i.e., Funko and Diageo PLC go up and down completely randomly.

Pair Corralation between Funko and Diageo PLC

Given the investment horizon of 90 days Funko Inc is expected to generate 1.66 times more return on investment than Diageo PLC. However, Funko is 1.66 times more volatile than Diageo PLC ADR. It trades about 0.33 of its potential returns per unit of risk. Diageo PLC ADR is currently generating about 0.18 per unit of risk. If you would invest  1,033  in Funko Inc on September 21, 2024 and sell it today you would earn a total of  202.00  from holding Funko Inc or generate 19.55% return on investment over 90 days.

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

Funko Inc  vs.  Diageo PLC ADR

Funko Inc

Risk-Adjusted Performance

2 of 100

Very Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Funko Inc are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy forward-looking signals, Funko is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

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 latest weak performance, the Stock's technical and fundamental indicators remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the firm investors.

Pair Trading with Funko and Diageo PLC

The main advantage of trading using opposite Funko and Diageo PLC positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Funko 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 Funko Inc 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 Headlines Timeline module to stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity.