Correlation Between Thales SA and Pernod Ricard

Can any of the company-specific risk be diversified away by investing in both Thales SA and Pernod Ricard 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 Thales SA and Pernod Ricard into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Thales SA and Pernod Ricard SA, you can compare the effects of market volatilities on Thales SA and Pernod Ricard 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 Thales SA with a short position of Pernod Ricard. Check out your portfolio center. Please also check ongoing floating volatility patterns of Thales SA and Pernod Ricard.

Diversification Opportunities for Thales SA and Pernod Ricard

-0.72

Correlation Coefficient

Thales SA  Pernod Ricard

Pay attention - limited upside

The 3 months correlation between Thales and Pernod is -0.72. Overlapping area represents the amount of risk that can be diversified away by holding Thales SA and Pernod Ricard SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pernod Ricard SA and Thales SA 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 Thales SA are associated (or correlated) with Pernod Ricard. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Pernod Ricard SA has no effect on the direction of Thales SA i.e., Thales SA and Pernod Ricard go up and down completely randomly.

Pair Corralation between Thales SA and Pernod Ricard

Assuming the 90 days horizon Thales SA is expected to generate 1.51 times more return on investment than Pernod Ricard. However, Thales SA is 1.51 times more volatile than Pernod Ricard SA. It trades about 0.35 of its potential returns per unit of risk. Pernod Ricard SA is currently generating about -0.11 per unit of risk. If you would invest  13,750  in Thales SA on December 29, 2024 and sell it today you would earn a total of  10,910  from holding Thales SA or generate 79.35% return on investment over 90 days.

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

Thales SA  vs.  Pernod Ricard SA

Thales SA

Risk-Adjusted Performance

Strong

Compared to the overall equity markets, risk-adjusted returns on investments in Thales SA are ranked lower than 27 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Thales SA sustained solid returns over the last few months and may actually be approaching a breakup point.

Pernod Ricard SA

Risk-Adjusted Performance

Very Weak

Over the last 90 days Pernod Ricard SA has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain somewhat strong which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with Thales SA and Pernod Ricard

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

The idea behind Thales SA and Pernod Ricard SA 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 Global Correlations module to find global opportunities by holding instruments from different markets.