Correlation Between Monks Investment and Diageo PLC

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

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

Diversification Opportunities for Monks Investment and Diageo PLC

0.32

Correlation Coefficient

Monks Investment  Diageo PLC

Weak diversification

The 3 months correlation between Monks and Diageo is 0.32. Overlapping area represents the amount of risk that can be diversified away by holding Monks Investment Trust and Diageo PLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Diageo PLC and Monks Investment 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 Monks Investment Trust 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 Monks Investment i.e., Monks Investment and Diageo PLC go up and down completely randomly.

Pair Corralation between Monks Investment and Diageo PLC

Assuming the 90 days trading horizon Monks Investment Trust is expected to generate 0.76 times more return on investment than Diageo PLC. However, Monks Investment Trust is 1.31 times less risky than Diageo PLC. It trades about -0.06 of its potential returns per unit of risk. Diageo PLC is currently generating about -0.17 per unit of risk. If you would invest  125,000  in Monks Investment Trust on December 30, 2024 and sell it today you would lose (6,200) from holding Monks Investment Trust or give up 4.96% of portfolio value over 90 days.

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

Monks Investment Trust  vs.  Diageo PLC

Monks Investment Trust

Risk-Adjusted Performance

Very Weak

Over the last 90 days Monks Investment Trust has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Monks Investment is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

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 uncertain performance in the last few months, the Stock's technical and fundamental 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 Monks Investment and Diageo PLC

The main advantage of trading using opposite Monks Investment and Diageo PLC positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Monks Investment 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 Monks Investment Trust 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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.