Correlation Between TAL Education and Pernod Ricard

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

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

Diversification Opportunities for TAL Education and Pernod Ricard

0.25

Correlation Coefficient

TAL Education  Pernod Ricard

Modest diversification

The 3 months correlation between TAL and Pernod is 0.25. Overlapping area represents the amount of risk that can be diversified away by holding TAL Education Group 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 TAL Education 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 TAL Education Group 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 TAL Education i.e., TAL Education and Pernod Ricard go up and down completely randomly.

Pair Corralation between TAL Education and Pernod Ricard

Assuming the 90 days trading horizon TAL Education Group is expected to under-perform the Pernod Ricard. In addition to that, TAL Education is 1.92 times more volatile than Pernod Ricard SA. It trades about -0.13 of its total potential returns per unit of risk. Pernod Ricard SA is currently generating about 0.11 per unit of volatility. If you would invest  10,565  in Pernod Ricard SA on October 4, 2024 and sell it today you would earn a total of  285.00  from holding Pernod Ricard SA or generate 2.7% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	94.74%
Values	Daily Returns

TAL Education Group  vs.  Pernod Ricard SA

TAL Education Group

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pernod Ricard SA

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Pernod Ricard SA has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of uncertain performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in February 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Pair Trading with TAL Education and Pernod Ricard

The main advantage of trading using opposite TAL Education and Pernod Ricard positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if TAL Education 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 TAL Education Group 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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.