Correlation Between Pernod Ricard and Carlsberg A/S

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

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

Diversification Opportunities for Pernod Ricard and Carlsberg A/S

0.82

Correlation Coefficient

Pernod Ricard  Carlsberg A/S

Very poor diversification

The 3 months correlation between Pernod and Carlsberg is 0.82. Overlapping area represents the amount of risk that can be diversified away by holding Pernod Ricard SA and Carlsberg AS in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Carlsberg A/S and Pernod Ricard 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 Pernod Ricard SA are associated (or correlated) with Carlsberg A/S. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Carlsberg A/S has no effect on the direction of Pernod Ricard i.e., Pernod Ricard and Carlsberg A/S go up and down completely randomly.

Pair Corralation between Pernod Ricard and Carlsberg A/S

Assuming the 90 days horizon Pernod Ricard SA is expected to under-perform the Carlsberg A/S. But the pink sheet apears to be less risky and, when comparing its historical volatility, Pernod Ricard SA is 1.03 times less risky than Carlsberg A/S. The pink sheet trades about -0.03 of its potential returns per unit of risk. The Carlsberg AS is currently generating about -0.01 of returns per unit of risk over similar time horizon. If you would invest  11,872  in Carlsberg AS on October 26, 2024 and sell it today you would lose (1,817) from holding Carlsberg AS or give up 15.3% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	99.62%
Values	Daily Returns

Pernod Ricard SA  vs.  Carlsberg AS

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

Carlsberg A/S

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Carlsberg AS has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest fragile performance, the Stock's forward-looking 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 Pernod Ricard and Carlsberg A/S

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

The idea behind Pernod Ricard SA and Carlsberg AS 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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.