Correlation Between Diageo Plc and GOLD ROAD

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

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

Diversification Opportunities for Diageo Plc and GOLD ROAD

-0.43

Correlation Coefficient

Diageo Plc  GOLD ROAD

Very good diversification

The 3 months correlation between Diageo and GOLD is -0.43. Overlapping area represents the amount of risk that can be diversified away by holding Diageo plc and GOLD ROAD RES in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on GOLD ROAD RES 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 GOLD ROAD. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of GOLD ROAD RES has no effect on the direction of Diageo Plc i.e., Diageo Plc and GOLD ROAD go up and down completely randomly.

Pair Corralation between Diageo Plc and GOLD ROAD

Assuming the 90 days trading horizon Diageo plc is expected to under-perform the GOLD ROAD. But the stock apears to be less risky and, when comparing its historical volatility, Diageo plc is 1.35 times less risky than GOLD ROAD. The stock trades about -0.15 of its potential returns per unit of risk. The GOLD ROAD RES is currently generating about 0.2 of returns per unit of risk over similar time horizon. If you would invest  120.00  in GOLD ROAD RES on December 28, 2024 and sell it today you would earn a total of  48.00  from holding GOLD ROAD RES or generate 40.0% return on investment over 90 days.

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

Diageo plc  vs.  GOLD ROAD RES

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. Despite fragile performance in the last few months, the Stock's forward indicators remain nearly stable which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

GOLD ROAD RES

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in GOLD ROAD RES are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady basic indicators, GOLD ROAD exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Diageo Plc and GOLD ROAD

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

The idea behind Diageo plc and GOLD ROAD RES 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 Bond Analysis module to evaluate and analyze corporate bonds as a potential investment for your portfolios..