Correlation Between Diageo Plc and Calibre Mining
Can any of the company-specific risk be diversified away by investing in both Diageo Plc and Calibre Mining 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 Calibre Mining into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Diageo plc and Calibre Mining Corp, you can compare the effects of market volatilities on Diageo Plc and Calibre Mining 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 Calibre Mining. Check out your portfolio center. Please also check ongoing floating volatility patterns of Diageo Plc and Calibre Mining.
Diversification Opportunities for Diageo Plc and Calibre Mining
0.53 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Diageo and Calibre is 0.53. Overlapping area represents the amount of risk that can be diversified away by holding Diageo plc and Calibre Mining Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Calibre Mining 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 Calibre Mining. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Calibre Mining Corp has no effect on the direction of Diageo Plc i.e., Diageo Plc and Calibre Mining go up and down completely randomly.
Pair Corralation between Diageo Plc and Calibre Mining
Assuming the 90 days trading horizon Diageo Plc is expected to generate 1.24 times less return on investment than Calibre Mining. But when comparing it to its historical volatility, Diageo plc is 1.86 times less risky than Calibre Mining. It trades about 0.04 of its potential returns per unit of risk. Calibre Mining Corp is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest 136.00 in Calibre Mining Corp on October 4, 2024 and sell it today you would earn a total of 5.00 from holding Calibre Mining Corp or generate 3.68% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Weak |
Accuracy | 100.0% |
Values | Daily Returns |
Diageo plc vs. Calibre Mining Corp
Performance |
Timeline |
Diageo plc |
Calibre Mining Corp |
Diageo Plc and Calibre Mining Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Diageo Plc and Calibre Mining
The main advantage of trading using opposite Diageo Plc and Calibre Mining positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Diageo Plc position performs unexpectedly, Calibre Mining 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 Calibre Mining will offset losses from the drop in Calibre Mining's long position.The idea behind Diageo plc and Calibre Mining 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.Calibre Mining vs. Apple Inc | Calibre Mining vs. Apple Inc | Calibre Mining vs. Apple Inc | Calibre Mining vs. Apple Inc |
Check out your portfolio center.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 Portfolio Dashboard module to portfolio dashboard that provides centralized access to all your investments.
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