Correlation Between Yuexiu Transport and Diageo Plc

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

By analyzing existing cross correlation between Yuexiu Transport Infrastructure and Diageo plc, you can compare the effects of market volatilities on Yuexiu Transport 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 Yuexiu Transport with a short position of Diageo Plc. Check out your portfolio center. Please also check ongoing floating volatility patterns of Yuexiu Transport and Diageo Plc.

Diversification Opportunities for Yuexiu Transport and Diageo Plc

0.1

Correlation Coefficient

Yuexiu Transport  Diageo Plc

Average diversification

The 3 months correlation between Yuexiu and Diageo is 0.1. Overlapping area represents the amount of risk that can be diversified away by holding Yuexiu Transport Infrastructur and Diageo plc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Diageo plc and Yuexiu Transport 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 Yuexiu Transport Infrastructure 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 has no effect on the direction of Yuexiu Transport i.e., Yuexiu Transport and Diageo Plc go up and down completely randomly.

Pair Corralation between Yuexiu Transport and Diageo Plc

Assuming the 90 days horizon Yuexiu Transport Infrastructure is expected to generate 1.32 times more return on investment than Diageo Plc. However, Yuexiu Transport is 1.32 times more volatile than Diageo plc. It trades about -0.01 of its potential returns per unit of risk. Diageo plc is currently generating about -0.19 per unit of risk. If you would invest  45.00  in Yuexiu Transport Infrastructure on December 20, 2024 and sell it today you would lose (1.00) from holding Yuexiu Transport Infrastructure or give up 2.22% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	98.33%
Values	Daily Returns

Yuexiu Transport Infrastructur  vs.  Diageo plc

Yuexiu Transport Inf

Risk-Adjusted Performance

Very Weak

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

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 fragile performance in the last few months, the Stock's forward indicators remain rather sound which may send shares a bit higher in April 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Pair Trading with Yuexiu Transport and Diageo Plc

The main advantage of trading using opposite Yuexiu Transport and Diageo Plc positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Yuexiu Transport 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 Yuexiu Transport Infrastructure and Diageo plc 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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.