Correlation Between Diageo PLC and Yit Oyj

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

Diversification Opportunities for Diageo PLC and Yit Oyj

-0.79

Correlation Coefficient

Diageo PLC  Yit Oyj

Pay attention - limited upside

The 3 months correlation between Diageo and Yit is -0.79. Overlapping area represents the amount of risk that can be diversified away by holding Diageo PLC ADR and Yit Oyj ADR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Yit Oyj ADR 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 Yit Oyj. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Yit Oyj ADR has no effect on the direction of Diageo PLC i.e., Diageo PLC and Yit Oyj go up and down completely randomly.

Pair Corralation between Diageo PLC and Yit Oyj

Considering the 90-day investment horizon Diageo PLC ADR is expected to under-perform the Yit Oyj. But the stock apears to be less risky and, when comparing its historical volatility, Diageo PLC ADR is 1.9 times less risky than Yit Oyj. The stock trades about -0.19 of its potential returns per unit of risk. The Yit Oyj ADR is currently generating about 0.22 of returns per unit of risk over similar time horizon. If you would invest  84.00  in Yit Oyj ADR on March 2, 2024 and sell it today you would earn a total of  24.00  from holding Yit Oyj ADR or generate 28.57% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	98.41%
Values	Daily Returns

Diageo PLC ADR  vs.  Yit Oyj ADR

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 fragile 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.

Yit Oyj ADR

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Yit Oyj ADR are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. In spite of fairly fragile basic indicators, Yit Oyj showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Diageo PLC and Yit Oyj

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

The idea behind Diageo PLC ADR and Yit Oyj ADR 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 Piotroski F Score module to get Piotroski F Score based on the binary analysis strategy of nine different fundamentals.