Correlation Between Diageo Plc and Apple

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

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

Diversification Opportunities for Diageo Plc and Apple

0.34

Correlation Coefficient

Diageo Plc  Apple

Weak diversification

The 3 months correlation between Diageo and Apple is 0.34. Overlapping area represents the amount of risk that can be diversified away by holding Diageo plc and Apple Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Apple Inc 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 Apple. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Apple Inc has no effect on the direction of Diageo Plc i.e., Diageo Plc and Apple go up and down completely randomly.

Pair Corralation between Diageo Plc and Apple

Assuming the 90 days trading horizon Diageo plc is expected to generate 0.87 times more return on investment than Apple. However, Diageo plc is 1.15 times less risky than Apple. It trades about -0.2 of its potential returns per unit of risk. Apple Inc is currently generating about -0.18 per unit of risk. If you would invest  2,961  in Diageo plc on December 21, 2024 and sell it today you would lose (526.00) from holding Diageo plc or give up 17.76% 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.  Apple Inc

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. In spite of uncertain performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in April 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Apple Inc

Risk-Adjusted Performance

Very Weak

Over the last 90 days Apple Inc has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fragile performance in the last few months, the Stock's fundamental indicators remain comparatively stable which may send shares a bit higher in April 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Pair Trading with Diageo Plc and Apple

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

The idea behind Diageo plc and Apple Inc 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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.