Correlation Between Pernod Ricard and Vintage Wine

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

Diversification Opportunities for Pernod Ricard and Vintage Wine

0.62

Correlation Coefficient

Pernod Ricard  Vintage Wine

Poor diversification

The 3 months correlation between Pernod and Vintage is 0.62. Overlapping area represents the amount of risk that can be diversified away by holding Pernod Ricard SA and Vintage Wine Estates in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vintage 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 Vintage Wine. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vintage Wine Estates has no effect on the direction of Pernod Ricard i.e., Pernod Ricard and Vintage Wine go up and down completely randomly.

Pair Corralation between Pernod Ricard and Vintage Wine

Assuming the 90 days horizon Pernod Ricard SA is expected to under-perform the Vintage Wine. But the pink sheet apears to be less risky and, when comparing its historical volatility, Pernod Ricard SA is 6.38 times less risky than Vintage Wine. The pink sheet trades about -0.07 of its potential returns per unit of risk. The Vintage Wine Estates is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest  0.27  in Vintage Wine Estates on September 12, 2024 and sell it today you would lose (0.07) from holding Vintage Wine Estates or give up 25.93% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	26.56%
Values	Daily Returns

Pernod Ricard SA  vs.  Vintage Wine Estates

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.

Vintage Wine Estates

Risk-Adjusted Performance

0 of 100

Weak

Over the last 90 days Vintage Wine Estates has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather inconsistent basic indicators, Vintage Wine exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Pernod Ricard and Vintage Wine

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

The idea behind Pernod Ricard SA and Vintage 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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.