Correlation Between Diageo Plc and BECLE SAB

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

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

Diversification Opportunities for Diageo Plc and BECLE SAB

0.67

Correlation Coefficient

Diageo Plc  BECLE SAB

Poor diversification

The 3 months correlation between Diageo and BECLE is 0.67. Overlapping area represents the amount of risk that can be diversified away by holding Diageo plc and BECLE SAB DE in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BECLE SAB DE 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 BECLE SAB. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BECLE SAB DE has no effect on the direction of Diageo Plc i.e., Diageo Plc and BECLE SAB go up and down completely randomly.

Pair Corralation between Diageo Plc and BECLE SAB

Assuming the 90 days trading horizon Diageo plc is expected to under-perform the BECLE SAB. But the stock apears to be less risky and, when comparing its historical volatility, Diageo plc is 2.06 times less risky than BECLE SAB. The stock trades about -0.02 of its potential returns per unit of risk. The BECLE SAB DE is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest  120.00  in BECLE SAB DE on September 28, 2024 and sell it today you would lose (6.00) from holding BECLE SAB DE or give up 5.0% of portfolio value over 90 days.

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

Diageo plc  vs.  BECLE SAB DE

Diageo plc

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Diageo plc has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable forward indicators, Diageo Plc is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

BECLE SAB DE

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days BECLE SAB DE has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fragile performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with Diageo Plc and BECLE SAB

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

The idea behind Diageo plc and BECLE SAB DE 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 CEOs Directory module to screen CEOs from public companies around the world.