Correlation Between MGP Ingredients and Pernod Ricard

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

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

Diversification Opportunities for MGP Ingredients and Pernod Ricard

0.88

Correlation Coefficient

MGP Ingredients  Pernod Ricard

Very poor diversification

The 3 months correlation between MGP and Pernod is 0.88. Overlapping area represents the amount of risk that can be diversified away by holding MGP Ingredients 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 MGP Ingredients 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 MGP Ingredients 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 MGP Ingredients i.e., MGP Ingredients and Pernod Ricard go up and down completely randomly.

Pair Corralation between MGP Ingredients and Pernod Ricard

Given the investment horizon of 90 days MGP Ingredients is expected to under-perform the Pernod Ricard. In addition to that, MGP Ingredients is 1.15 times more volatile than Pernod Ricard SA. It trades about -0.08 of its total potential returns per unit of risk. Pernod Ricard SA is currently generating about -0.05 per unit of volatility. If you would invest  16,112  in Pernod Ricard SA on September 4, 2024 and sell it today you would lose (5,082) from holding Pernod Ricard SA or give up 31.54% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	99.6%
Values	Daily Returns

MGP Ingredients  vs.  Pernod Ricard SA

MGP Ingredients

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days MGP Ingredients has generated negative risk-adjusted returns adding no value to investors with long positions. Despite unsteady performance in the last few months, the Stock's basic indicators remain fairly strong which may send shares a bit higher in January 2025. The recent confusion may also be a sign of long-lasting up-swing for the firm traders.

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. Despite weak performance in the last few months, the Stock's fundamental indicators remain nearly stable which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with MGP Ingredients and Pernod Ricard

The main advantage of trading using opposite MGP Ingredients and Pernod Ricard positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if MGP Ingredients 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 MGP Ingredients 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 ETF Categories module to list of ETF categories grouped based on various criteria, such as the investment strategy or type of investments.