Correlation Between Diageo PLC and Lindblad Expeditions

Can any of the company-specific risk be diversified away by investing in both Diageo PLC and Lindblad Expeditions 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 Lindblad Expeditions 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 Lindblad Expeditions Holdings, you can compare the effects of market volatilities on Diageo PLC and Lindblad Expeditions 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 Lindblad Expeditions. Check out your portfolio center. Please also check ongoing floating volatility patterns of Diageo PLC and Lindblad Expeditions.

Diversification Opportunities for Diageo PLC and Lindblad Expeditions

-0.88

Correlation Coefficient

Diageo PLC  Lindblad Expeditions

Pay attention - limited upside

The 3 months correlation between Diageo and Lindblad is -0.88. Overlapping area represents the amount of risk that can be diversified away by holding Diageo PLC ADR and Lindblad Expeditions Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lindblad Expeditions 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 Lindblad Expeditions. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lindblad Expeditions has no effect on the direction of Diageo PLC i.e., Diageo PLC and Lindblad Expeditions go up and down completely randomly.

Pair Corralation between Diageo PLC and Lindblad Expeditions

Considering the 90-day investment horizon Diageo PLC ADR is expected to under-perform the Lindblad Expeditions. But the stock apears to be less risky and, when comparing its historical volatility, Diageo PLC ADR is 3.11 times less risky than Lindblad Expeditions. The stock trades about -0.04 of its potential returns per unit of risk. The Lindblad Expeditions Holdings is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest  914.00  in Lindblad Expeditions Holdings on September 29, 2024 and sell it today you would earn a total of  287.00  from holding Lindblad Expeditions Holdings or generate 31.4% 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.  Lindblad Expeditions Holdings

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.

Lindblad Expeditions

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Lindblad Expeditions Holdings are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of rather inconsistent basic indicators, Lindblad Expeditions exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Diageo PLC and Lindblad Expeditions

The main advantage of trading using opposite Diageo PLC and Lindblad Expeditions positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Diageo PLC position performs unexpectedly, Lindblad Expeditions 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 Lindblad Expeditions will offset losses from the drop in Lindblad Expeditions' long position.

The idea behind Diageo PLC ADR and Lindblad Expeditions Holdings 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 Center module to all portfolio management and optimization tools to improve performance of your portfolios.