Correlation Between Pernod Ricard and Aristocrat Group

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

Diversification Opportunities for Pernod Ricard and Aristocrat Group

0.37

Correlation Coefficient

Pernod Ricard  Aristocrat Group

Weak diversification

The 3 months correlation between Pernod and Aristocrat is 0.37. Overlapping area represents the amount of risk that can be diversified away by holding Pernod Ricard SA and Aristocrat Group Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Aristocrat Group Corp 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 Aristocrat Group. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Aristocrat Group Corp has no effect on the direction of Pernod Ricard i.e., Pernod Ricard and Aristocrat Group go up and down completely randomly.

Pair Corralation between Pernod Ricard and Aristocrat Group

Assuming the 90 days horizon Pernod Ricard SA is expected to under-perform the Aristocrat Group. But the pink sheet apears to be less risky and, when comparing its historical volatility, Pernod Ricard SA is 46.51 times less risky than Aristocrat Group. The pink sheet trades about -0.08 of its potential returns per unit of risk. The Aristocrat Group Corp is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest  0.87  in Aristocrat Group Corp on September 28, 2024 and sell it today you would lose (0.17) from holding Aristocrat Group Corp or give up 19.54% 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.  Aristocrat Group Corp

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. In spite of weak performance in the last few months, the Stock's fundamental indicators remain fairly strong which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Aristocrat Group Corp

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Aristocrat Group Corp are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of rather fragile fundamental indicators, Aristocrat Group exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Pernod Ricard and Aristocrat Group

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

The idea behind Pernod Ricard SA and Aristocrat Group Corp 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.

Check out your portfolio center.

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.