Correlation Between Diageo PLC and Hf Foods

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

Diversification Opportunities for Diageo PLC and Hf Foods

0.67

Correlation Coefficient

Diageo PLC  Hf Foods

Poor diversification

The 3 months correlation between Diageo and HFFG is 0.67. Overlapping area represents the amount of risk that can be diversified away by holding Diageo PLC ADR and Hf Foods Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hf Foods Group 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 Hf Foods. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hf Foods Group has no effect on the direction of Diageo PLC i.e., Diageo PLC and Hf Foods go up and down completely randomly.

Pair Corralation between Diageo PLC and Hf Foods

Considering the 90-day investment horizon Diageo PLC ADR is expected to generate 0.33 times more return on investment than Hf Foods. However, Diageo PLC ADR is 3.06 times less risky than Hf Foods. It trades about 0.18 of its potential returns per unit of risk. Hf Foods Group is currently generating about 0.0 per unit of risk. If you would invest  13,739  in Diageo PLC ADR on February 13, 2024 and sell it today you would earn a total of  555.00  from holding Diageo PLC ADR or generate 4.04% return on investment over 90 days.

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

Diageo PLC ADR  vs.  Hf Foods Group

Diageo PLC ADR

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Diageo PLC ADR are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. 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.

Hf Foods Group

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Hf Foods Group has generated negative risk-adjusted returns adding no value to investors with long positions. Despite inconsistent performance in the last few months, the Stock's technical and fundamental indicators remain nearly stable which may send shares a bit higher in June 2024. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with Diageo PLC and Hf Foods

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

The idea behind Diageo PLC ADR and Hf Foods Group 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 Technical Analysis module to check basic technical indicators and analysis based on most latest market data.