Correlation Between Inflection Point and Diageo PLC

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

By analyzing existing cross correlation between Inflection Point Acquisition and Diageo PLC ADR, you can compare the effects of market volatilities on Inflection Point 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 Inflection Point with a short position of Diageo PLC. Check out your portfolio center. Please also check ongoing floating volatility patterns of Inflection Point and Diageo PLC.

Diversification Opportunities for Inflection Point and Diageo PLC

0.24

Correlation Coefficient

Inflection Point  Diageo PLC

Modest diversification

The 3 months correlation between Inflection and Diageo is 0.24. Overlapping area represents the amount of risk that can be diversified away by holding Inflection Point Acquisition and Diageo PLC ADR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Diageo PLC ADR and Inflection Point 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 Inflection Point Acquisition 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 ADR has no effect on the direction of Inflection Point i.e., Inflection Point and Diageo PLC go up and down completely randomly.

Pair Corralation between Inflection Point and Diageo PLC

Assuming the 90 days horizon Inflection Point Acquisition is expected to generate 2.54 times more return on investment than Diageo PLC. However, Inflection Point is 2.54 times more volatile than Diageo PLC ADR. It trades about -0.05 of its potential returns per unit of risk. Diageo PLC ADR is currently generating about -0.14 per unit of risk. If you would invest  1,255  in Inflection Point Acquisition on December 29, 2024 and sell it today you would lose (198.00) from holding Inflection Point Acquisition or give up 15.78% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	83.61%
Values	Daily Returns

Inflection Point Acquisition  vs.  Diageo PLC ADR

Inflection Point Acq

Risk-Adjusted Performance

Very Weak

Over the last 90 days Inflection Point Acquisition has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak 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.

Diageo PLC ADR

Risk-Adjusted Performance

Very Weak

Over the last 90 days Diageo PLC ADR has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's technical and fundamental indicators remain very healthy which may send shares a bit higher in April 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

Pair Trading with Inflection Point and Diageo PLC

The main advantage of trading using opposite Inflection Point and Diageo PLC positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Inflection Point 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 Inflection Point Acquisition and Diageo PLC ADR 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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.