Correlation Between Pernod Ricard and Treasury Wine

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

Diversification Opportunities for Pernod Ricard and Treasury Wine

0.24

Correlation Coefficient

Pernod Ricard  Treasury Wine

Modest diversification

The 3 months correlation between Pernod and Treasury is 0.24. Overlapping area represents the amount of risk that can be diversified away by holding Pernod Ricard SA and Treasury Wine Estates in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Treasury Wine Estates 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 Treasury Wine. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Treasury Wine Estates has no effect on the direction of Pernod Ricard i.e., Pernod Ricard and Treasury Wine go up and down completely randomly.

Pair Corralation between Pernod Ricard and Treasury Wine

Assuming the 90 days horizon Pernod Ricard SA is expected to generate 1.65 times more return on investment than Treasury Wine. However, Pernod Ricard is 1.65 times more volatile than Treasury Wine Estates. It trades about -0.01 of its potential returns per unit of risk. Treasury Wine Estates is currently generating about -0.13 per unit of risk. If you would invest  10,765  in Pernod Ricard SA on December 24, 2024 and sell it today you would lose (382.00) from holding Pernod Ricard SA or give up 3.55% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

Pernod Ricard SA  vs.  Treasury Wine Estates

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.

Treasury Wine Estates

Risk-Adjusted Performance

Very Weak

Over the last 90 days Treasury Wine Estates has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unfluctuating performance in the last few months, the Stock's basic indicators remain fairly strong which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with Pernod Ricard and Treasury Wine

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

The idea behind Pernod Ricard SA and Treasury Wine Estates 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 Portfolio Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.