Correlation Between Diageo PLC and Hanover Foods

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

Diversification Opportunities for Diageo PLC and Hanover Foods

0.0

Correlation Coefficient

Diageo PLC  Hanover Foods

Pay attention - limited upside

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

Pair Corralation between Diageo PLC and Hanover Foods

Considering the 90-day investment horizon Diageo PLC ADR is expected to under-perform the Hanover Foods. In addition to that, Diageo PLC is 1.34 times more volatile than Hanover Foods. It trades about -0.03 of its total potential returns per unit of risk. Hanover Foods is currently generating about 0.04 per unit of volatility. If you would invest  5,334  in Hanover Foods on February 21, 2024 and sell it today you would earn a total of  838.00  from holding Hanover Foods or generate 15.71% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	84.48%
Values	Daily Returns

Diageo PLC ADR  vs.  Hanover Foods

Diageo PLC ADR

Risk-Adjusted Performance

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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 very healthy technical and fundamental indicators, Diageo PLC is not utilizing all of its potentials. The current stock price disarray, may contribute to short-term losses for the investors.

Hanover Foods

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Diageo PLC and Hanover Foods

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

The idea behind Diageo PLC ADR and Hanover Foods 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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.