Correlation Between Diageo PLC and Celestica
Can any of the company-specific risk be diversified away by investing in both Diageo PLC and Celestica 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 Diageo PLC and Celestica into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Diageo PLC ADR and Celestica, you can compare the effects of market volatilities on Diageo PLC and Celestica 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 Diageo PLC with a short position of Celestica. Check out your portfolio center. Please also check ongoing floating volatility patterns of Diageo PLC and Celestica.
Diversification Opportunities for Diageo PLC and Celestica
-0.8 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between Diageo and Celestica is -0.8. Overlapping area represents the amount of risk that can be diversified away by holding Diageo PLC ADR and Celestica in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Celestica and Diageo PLC 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 Diageo PLC ADR are associated (or correlated) with Celestica. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Celestica has no effect on the direction of Diageo PLC i.e., Diageo PLC and Celestica go up and down completely randomly.
Pair Corralation between Diageo PLC and Celestica
Considering the 90-day investment horizon Diageo PLC is expected to generate 2.75 times less return on investment than Celestica. But when comparing it to its historical volatility, Diageo PLC ADR is 2.14 times less risky than Celestica. It trades about 0.14 of its potential returns per unit of risk. Celestica is currently generating about 0.18 of returns per unit of risk over similar time horizon. If you would invest 8,560 in Celestica on September 24, 2024 and sell it today you would earn a total of 985.00 from holding Celestica or generate 11.51% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Against |
Strength | Significant |
Accuracy | 100.0% |
Values | Daily Returns |
Diageo PLC ADR vs. Celestica
Performance |
Timeline |
Diageo PLC ADR |
Celestica |
Diageo PLC and Celestica Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Diageo PLC and Celestica
The main advantage of trading using opposite Diageo PLC and Celestica positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Diageo PLC position performs unexpectedly, Celestica 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 Celestica will offset losses from the drop in Celestica's long position.Diageo PLC vs. Brown Forman | Diageo PLC vs. MGP Ingredients | Diageo PLC vs. Brown Forman | Diageo PLC vs. Constellation Brands Class |
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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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.
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