Correlation Between Pernod Ricard and China Tontine

Can any of the company-specific risk be diversified away by investing in both Pernod Ricard and China Tontine 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 China Tontine 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 China Tontine Wines, you can compare the effects of market volatilities on Pernod Ricard and China Tontine 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 China Tontine. Check out your portfolio center. Please also check ongoing floating volatility patterns of Pernod Ricard and China Tontine.

Diversification Opportunities for Pernod Ricard and China Tontine

0.0

Correlation Coefficient

Pernod Ricard  China Tontine

Pay attention - limited upside

The 3 months correlation between Pernod and China is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding Pernod Ricard SA and China Tontine Wines in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on China Tontine Wines 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 China Tontine. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of China Tontine Wines has no effect on the direction of Pernod Ricard i.e., Pernod Ricard and China Tontine go up and down completely randomly.

Pair Corralation between Pernod Ricard and China Tontine

Assuming the 90 days horizon Pernod Ricard SA is expected to under-perform the China Tontine. But the pink sheet apears to be less risky and, when comparing its historical volatility, Pernod Ricard SA is 33.98 times less risky than China Tontine. The pink sheet trades about -0.03 of its potential returns per unit of risk. The China Tontine Wines is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest  1.50  in China Tontine Wines on October 5, 2024 and sell it today you would earn a total of  5.60  from holding China Tontine Wines or generate 373.33% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	98.98%
Values	Daily Returns

Pernod Ricard SA  vs.  China Tontine Wines

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

China Tontine Wines

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days China Tontine Wines has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, China Tontine is not utilizing all of its potentials. The latest stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Pernod Ricard and China Tontine

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

The idea behind Pernod Ricard SA and China Tontine Wines 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 Technical Analysis module to check basic technical indicators and analysis based on most latest market data.