Correlation Between 629377CH3 and Diageo PLC

Can any of the company-specific risk be diversified away by investing in both 629377CH3 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 629377CH3 and Diageo PLC into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between NRG Energy 525 and Diageo PLC ADR, you can compare the effects of market volatilities on 629377CH3 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 629377CH3 with a short position of Diageo PLC. Check out your portfolio center. Please also check ongoing floating volatility patterns of 629377CH3 and Diageo PLC.

Diversification Opportunities for 629377CH3 and Diageo PLC

0.08

Correlation Coefficient

629377CH3  Diageo PLC

Significant diversification

The 3 months correlation between 629377CH3 and Diageo is 0.08. Overlapping area represents the amount of risk that can be diversified away by holding NRG Energy 525 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 629377CH3 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 NRG Energy 525 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 629377CH3 i.e., 629377CH3 and Diageo PLC go up and down completely randomly.

Pair Corralation between 629377CH3 and Diageo PLC

Assuming the 90 days trading horizon NRG Energy 525 is expected to under-perform the Diageo PLC. In addition to that, 629377CH3 is 1.02 times more volatile than Diageo PLC ADR. It trades about -0.25 of its total potential returns per unit of risk. Diageo PLC ADR is currently generating about 0.19 per unit of volatility. If you would invest  11,889  in Diageo PLC ADR on October 4, 2024 and sell it today you would earn a total of  723.00  from holding Diageo PLC ADR or generate 6.08% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	95.24%
Values	Daily Returns

NRG Energy 525  vs.  Diageo PLC ADR

NRG Energy 525

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days NRG Energy 525 has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest unfluctuating performance, the Bond's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for NRG Energy 525 investors.

Diageo PLC ADR

Risk-Adjusted Performance

0 of 100

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 latest weak performance, the Stock's technical and fundamental indicators remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the firm investors.

Pair Trading with 629377CH3 and Diageo PLC

The main advantage of trading using opposite 629377CH3 and Diageo PLC positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if 629377CH3 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 NRG Energy 525 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 Economic Indicators module to top statistical indicators that provide insights into how an economy is performing.