Correlation Between Pernod Ricard and Socit BIC

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

Diversification Opportunities for Pernod Ricard and Socit BIC

-0.13

Correlation Coefficient

Pernod Ricard  Socit BIC

Good diversification

The 3 months correlation between Pernod and Socit is -0.13. Overlapping area represents the amount of risk that can be diversified away by holding Pernod Ricard SA and Socit BIC SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Socit BIC SA 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 Socit BIC. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Socit BIC SA has no effect on the direction of Pernod Ricard i.e., Pernod Ricard and Socit BIC go up and down completely randomly.

Pair Corralation between Pernod Ricard and Socit BIC

Assuming the 90 days horizon Pernod Ricard SA is expected to generate 1.51 times more return on investment than Socit BIC. However, Pernod Ricard is 1.51 times more volatile than Socit BIC SA. It trades about -0.04 of its potential returns per unit of risk. Socit BIC SA is currently generating about -0.09 per unit of risk. If you would invest  10,590  in Pernod Ricard SA on November 29, 2024 and sell it today you would lose (510.00) from holding Pernod Ricard SA or give up 4.82% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.39%
Values	Daily Returns

Pernod Ricard SA  vs.  Socit BIC SA

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 somewhat strong basic indicators, Pernod Ricard is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Socit BIC SA

Risk-Adjusted Performance

Very Weak

Over the last 90 days Socit BIC SA has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Pair Trading with Pernod Ricard and Socit BIC

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

The idea behind Pernod Ricard SA and Socit BIC SA 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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.