Correlation Between Berkeley Energia and Diageo Plc

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

By analyzing existing cross correlation between Berkeley Energia Limited and Diageo plc, you can compare the effects of market volatilities on Berkeley Energia and Diageo Plc 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 Berkeley Energia with a short position of Diageo Plc. Check out your portfolio center. Please also check ongoing floating volatility patterns of Berkeley Energia and Diageo Plc.

Diversification Opportunities for Berkeley Energia and Diageo Plc

-0.55

Correlation Coefficient

Berkeley Energia  Diageo Plc

Excellent diversification

The 3 months correlation between Berkeley and Diageo is -0.55. Overlapping area represents the amount of risk that can be diversified away by holding Berkeley Energia Limited and Diageo plc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Diageo plc and Berkeley Energia 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 Berkeley Energia Limited are associated (or correlated) with Diageo Plc. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Diageo plc has no effect on the direction of Berkeley Energia i.e., Berkeley Energia and Diageo Plc go up and down completely randomly.

Pair Corralation between Berkeley Energia and Diageo Plc

Assuming the 90 days horizon Berkeley Energia Limited is expected to generate 3.59 times more return on investment than Diageo Plc. However, Berkeley Energia is 3.59 times more volatile than Diageo plc. It trades about 0.02 of its potential returns per unit of risk. Diageo plc is currently generating about -0.1 per unit of risk. If you would invest  31.00  in Berkeley Energia Limited on April 20, 2025 and sell it today you would lose (1.00) from holding Berkeley Energia Limited or give up 3.23% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

Berkeley Energia Limited  vs.  Diageo plc

Berkeley Energia

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Berkeley Energia Limited are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, Berkeley Energia is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Diageo plc

Risk-Adjusted Performance

Very Weak

Over the last 90 days Diageo plc has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest fragile performance, the Stock's forward indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

Pair Trading with Berkeley Energia and Diageo Plc

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

The idea behind Berkeley Energia Limited and Diageo plc 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 Money Managers module to screen money managers from public funds and ETFs managed around the world.