Correlation Between Pernod Ricard and Hanover Foods

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

Diversification Opportunities for Pernod Ricard and Hanover Foods

0.68

Correlation Coefficient

Pernod Ricard  Hanover Foods

Poor diversification

The 3 months correlation between Pernod and Hanover is 0.68. Overlapping area represents the amount of risk that can be diversified away by holding Pernod Ricard SA and Hanover Foods in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hanover Foods 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 Hanover Foods. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hanover Foods has no effect on the direction of Pernod Ricard i.e., Pernod Ricard and Hanover Foods go up and down completely randomly.

Pair Corralation between Pernod Ricard and Hanover Foods

Assuming the 90 days horizon Pernod Ricard SA is expected to under-perform the Hanover Foods. But the pink sheet apears to be less risky and, when comparing its historical volatility, Pernod Ricard SA is 1.78 times less risky than Hanover Foods. The pink sheet trades about -0.01 of its potential returns per unit of risk. The Hanover Foods is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest  6,300  in Hanover Foods on December 21, 2024 and sell it today you would lose (300.00) from holding Hanover Foods or give up 4.76% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	96.67%
Values	Daily Returns

Pernod Ricard SA  vs.  Hanover Foods

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 nearly stable fundamental indicators, Pernod Ricard is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Hanover Foods

Risk-Adjusted Performance

Very Weak

Over the last 90 days Hanover Foods has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Hanover Foods is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Pernod Ricard and Hanover Foods

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

The idea behind Pernod Ricard SA and Hanover Foods 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.