Correlation Between Diageo PLC and Where Food

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

Diversification Opportunities for Diageo PLC and Where Food

-0.49

Correlation Coefficient

Diageo PLC  Where Food

Very good diversification

The 3 months correlation between Diageo and Where is -0.49. Overlapping area represents the amount of risk that can be diversified away by holding Diageo PLC ADR and Where Food Comes in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Where Food Comes 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 Where Food. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Where Food Comes has no effect on the direction of Diageo PLC i.e., Diageo PLC and Where Food go up and down completely randomly.

Pair Corralation between Diageo PLC and Where Food

Considering the 90-day investment horizon Diageo PLC ADR is expected to under-perform the Where Food. But the stock apears to be less risky and, when comparing its historical volatility, Diageo PLC ADR is 1.09 times less risky than Where Food. The stock trades about -0.08 of its potential returns per unit of risk. The Where Food Comes is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  1,136  in Where Food Comes on September 3, 2024 and sell it today you would earn a total of  75.00  from holding Where Food Comes or generate 6.6% return on investment over 90 days.

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

Diageo PLC ADR  vs.  Where Food Comes

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.

Where Food Comes

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Where Food Comes are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak fundamental indicators, Where Food may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Diageo PLC and Where Food

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

The idea behind Diageo PLC ADR and Where Food Comes 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 Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.