Correlation Between Henderson Land and Diageo Plc

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

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

Diversification Opportunities for Henderson Land and Diageo Plc

-0.78

Correlation Coefficient

Henderson Land  Diageo Plc

Pay attention - limited upside

The 3 months correlation between Henderson and Diageo is -0.78. Overlapping area represents the amount of risk that can be diversified away by holding Henderson Land Development and Diageo plc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Diageo plc and Henderson Land 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 Henderson Land Development 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 Henderson Land i.e., Henderson Land and Diageo Plc go up and down completely randomly.

Pair Corralation between Henderson Land and Diageo Plc

Assuming the 90 days horizon Henderson Land Development is expected to generate 1.62 times more return on investment than Diageo Plc. However, Henderson Land is 1.62 times more volatile than Diageo plc. It trades about 0.15 of its potential returns per unit of risk. Diageo plc is currently generating about -0.09 per unit of risk. If you would invest  233.00  in Henderson Land Development on April 23, 2025 and sell it today you would earn a total of  55.00  from holding Henderson Land Development or generate 23.61% return on investment over 90 days.

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

Henderson Land Development  vs.  Diageo plc

Henderson Land Devel

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Henderson Land Development are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Henderson Land 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. 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 Henderson Land and Diageo Plc

The main advantage of trading using opposite Henderson Land and Diageo Plc positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Henderson Land 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 Henderson Land Development 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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.