Correlation Between Diageo PLC and SupplyMe Capital

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

By analyzing existing cross correlation between Diageo PLC and SupplyMe Capital PLC, you can compare the effects of market volatilities on Diageo PLC and SupplyMe Capital 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 SupplyMe Capital. Check out your portfolio center. Please also check ongoing floating volatility patterns of Diageo PLC and SupplyMe Capital.

Diversification Opportunities for Diageo PLC and SupplyMe Capital

0.69

Correlation Coefficient

Diageo PLC  SupplyMe Capital

Poor diversification

The 3 months correlation between Diageo and SupplyMe is 0.69. Overlapping area represents the amount of risk that can be diversified away by holding Diageo PLC and SupplyMe Capital PLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SupplyMe Capital PLC 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 are associated (or correlated) with SupplyMe Capital. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SupplyMe Capital PLC has no effect on the direction of Diageo PLC i.e., Diageo PLC and SupplyMe Capital go up and down completely randomly.

Pair Corralation between Diageo PLC and SupplyMe Capital

Assuming the 90 days trading horizon Diageo PLC is expected to under-perform the SupplyMe Capital. But the stock apears to be less risky and, when comparing its historical volatility, Diageo PLC is 10.92 times less risky than SupplyMe Capital. The stock trades about -0.03 of its potential returns per unit of risk. The SupplyMe Capital PLC is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest  0.50  in SupplyMe Capital PLC on September 30, 2024 and sell it today you would lose (0.11) from holding SupplyMe Capital PLC or give up 22.0% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	100.0%
Values	Daily Returns

Diageo PLC  vs.  SupplyMe Capital PLC

Diageo PLC

Risk-Adjusted Performance

0 of 100

Very Weak

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

SupplyMe Capital PLC

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in SupplyMe Capital PLC are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, SupplyMe Capital unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Diageo PLC and SupplyMe Capital

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

The idea behind Diageo PLC and SupplyMe Capital PLC 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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .