Correlation Between KENEDIX OFFICE and Diageo Plc

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

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

Diversification Opportunities for KENEDIX OFFICE and Diageo Plc

0.33

Correlation Coefficient

KENEDIX OFFICE  Diageo Plc

Weak diversification

The 3 months correlation between KENEDIX and Diageo is 0.33. Overlapping area represents the amount of risk that can be diversified away by holding KENEDIX OFFICE INV and Diageo plc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Diageo plc and KENEDIX OFFICE 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 KENEDIX OFFICE INV 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 KENEDIX OFFICE i.e., KENEDIX OFFICE and Diageo Plc go up and down completely randomly.

Pair Corralation between KENEDIX OFFICE and Diageo Plc

Assuming the 90 days horizon KENEDIX OFFICE INV is expected to generate 0.97 times more return on investment than Diageo Plc. However, KENEDIX OFFICE INV is 1.03 times less risky than Diageo Plc. It trades about -0.02 of its potential returns per unit of risk. Diageo plc is currently generating about -0.04 per unit of risk. If you would invest  107,000  in KENEDIX OFFICE INV on October 11, 2024 and sell it today you would lose (15,500) from holding KENEDIX OFFICE INV or give up 14.49% of portfolio value over 90 days.

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

KENEDIX OFFICE INV  vs.  Diageo plc

KENEDIX OFFICE INV

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in KENEDIX OFFICE INV are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, KENEDIX OFFICE is not utilizing all of its potentials. The newest stock price disturbance, may contribute to mid-run losses for the stockholders.

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 basic indicators, Diageo Plc is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with KENEDIX OFFICE and Diageo Plc

The main advantage of trading using opposite KENEDIX OFFICE and Diageo Plc positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if KENEDIX OFFICE 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 KENEDIX OFFICE INV 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.

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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.