Correlation Between Diageo Plc and Davide Campari

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

By analyzing existing cross correlation between Diageo plc and Davide Campari Milano, you can compare the effects of market volatilities on Diageo Plc and Davide Campari 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 Davide Campari. Check out your portfolio center. Please also check ongoing floating volatility patterns of Diageo Plc and Davide Campari.

Diversification Opportunities for Diageo Plc and Davide Campari

0.8

Correlation Coefficient

Diageo Plc  Davide Campari

Very poor diversification

The 3 months correlation between Diageo and Davide is 0.8. Overlapping area represents the amount of risk that can be diversified away by holding Diageo plc and Davide Campari Milano in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Davide Campari Milano 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 Davide Campari. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Davide Campari Milano has no effect on the direction of Diageo Plc i.e., Diageo Plc and Davide Campari go up and down completely randomly.

Pair Corralation between Diageo Plc and Davide Campari

Assuming the 90 days horizon Diageo plc is expected to generate 0.49 times more return on investment than Davide Campari. However, Diageo plc is 2.05 times less risky than Davide Campari. It trades about 0.15 of its potential returns per unit of risk. Davide Campari Milano is currently generating about 0.03 per unit of risk. If you would invest  2,893  in Diageo plc on September 25, 2024 and sell it today you would earn a total of  127.00  from holding Diageo plc or generate 4.39% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	95.45%
Values	Daily Returns

Diageo plc  vs.  Davide Campari Milano

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. Despite nearly stable basic indicators, Diageo Plc is not utilizing all of its potentials. The newest stock price disturbance, may contribute to mid-run losses for the stockholders.

Davide Campari Milano

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Davide Campari Milano has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fragile performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with Diageo Plc and Davide Campari

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

The idea behind Diageo plc and Davide Campari Milano 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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.