Correlation Between Gigaset AG and Diageo Plc

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

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

Diversification Opportunities for Gigaset AG and Diageo Plc

-0.47

Correlation Coefficient

Gigaset AG  Diageo Plc

Very good diversification

The 3 months correlation between Gigaset and Diageo is -0.47. Overlapping area represents the amount of risk that can be diversified away by holding Gigaset AG and Diageo plc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Diageo plc and Gigaset AG 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 Gigaset AG 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 Gigaset AG i.e., Gigaset AG and Diageo Plc go up and down completely randomly.

Pair Corralation between Gigaset AG and Diageo Plc

Assuming the 90 days horizon Gigaset AG is expected to generate 12.38 times more return on investment than Diageo Plc. However, Gigaset AG is 12.38 times more volatile than Diageo plc. It trades about 0.06 of its potential returns per unit of risk. Diageo plc is currently generating about -0.12 per unit of risk. If you would invest  2.40  in Gigaset AG on April 23, 2025 and sell it today you would lose (0.68) from holding Gigaset AG or give up 28.33% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	98.44%
Values	Daily Returns

Gigaset AG  vs.  Diageo plc

Gigaset AG

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Gigaset AG are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain basic indicators, Gigaset AG reported solid returns over the last few months and may actually be approaching a breakup point.

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. Despite latest fragile performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Pair Trading with Gigaset AG and Diageo Plc

The main advantage of trading using opposite Gigaset AG and Diageo Plc positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Gigaset AG 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 Gigaset AG 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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.