Correlation Between Diageo PLC and Iconic Brands

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

Diversification Opportunities for Diageo PLC and Iconic Brands

0.0

Correlation Coefficient

Diageo PLC  Iconic Brands

Pay attention - limited upside

The 3 months correlation between Diageo and Iconic is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding Diageo PLC ADR and Iconic Brands in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Iconic Brands 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 Iconic Brands. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Iconic Brands has no effect on the direction of Diageo PLC i.e., Diageo PLC and Iconic Brands go up and down completely randomly.

Pair Corralation between Diageo PLC and Iconic Brands

If you would invest  12,871  in Diageo PLC ADR on July 10, 2024 and sell it today you would earn a total of  564.00  from holding Diageo PLC ADR or generate 4.38% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

Diageo PLC ADR  vs.  Iconic Brands

Diageo PLC ADR

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Diageo PLC ADR are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of very weak technical and fundamental indicators, Diageo PLC may actually be approaching a critical reversion point that can send shares even higher in November 2024.

Iconic Brands

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Iconic Brands has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Iconic Brands is not utilizing all of its potentials. The recent stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Diageo PLC and Iconic Brands

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

The idea behind Diageo PLC ADR and Iconic Brands 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.

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 Portfolio Center module to all portfolio management and optimization tools to improve performance of your portfolios.