Correlation Between Vintage Wine and Diageo PLC

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

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

Diversification Opportunities for Vintage Wine and Diageo PLC

0.0

Correlation Coefficient

Vintage Wine  Diageo PLC

Pay attention - limited upside

The 3 months correlation between Vintage and Diageo is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding Vintage Wine Estates 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 Vintage Wine 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 Vintage Wine Estates 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 Vintage Wine i.e., Vintage Wine and Diageo PLC go up and down completely randomly.

Pair Corralation between Vintage Wine and Diageo PLC

If you would invest (100.00) in Vintage Wine Estates on December 3, 2024 and sell it today you would earn a total of  100.00  from holding Vintage Wine Estates or generate -100.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	0.0%
Values	Daily Returns

Vintage Wine Estates  vs.  Diageo PLC ADR

Vintage Wine Estates

Risk-Adjusted Performance

Very Weak

Over the last 90 days Vintage Wine Estates has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound basic indicators, Vintage Wine is not utilizing all of its potentials. The recent stock price tumult, may contribute to shorter-term losses for the shareholders.

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 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 Vintage Wine and Diageo PLC

The main advantage of trading using opposite Vintage Wine and Diageo PLC positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Vintage Wine 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 Vintage Wine Estates 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 Portfolio Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.