Correlation Between Pernod Ricard and Hoteles Bestprice

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

Diversification Opportunities for Pernod Ricard and Hoteles Bestprice

0.82

Correlation Coefficient

Pernod Ricard  Hoteles Bestprice

Very poor diversification

The 3 months correlation between Pernod and Hoteles is 0.82. Overlapping area represents the amount of risk that can be diversified away by holding Pernod Ricard SA and Hoteles Bestprice SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hoteles Bestprice 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 Hoteles Bestprice. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hoteles Bestprice has no effect on the direction of Pernod Ricard i.e., Pernod Ricard and Hoteles Bestprice go up and down completely randomly.

Pair Corralation between Pernod Ricard and Hoteles Bestprice

Assuming the 90 days horizon Pernod Ricard SA is expected to under-perform the Hoteles Bestprice. But the stock apears to be less risky and, when comparing its historical volatility, Pernod Ricard SA is 2.01 times less risky than Hoteles Bestprice. The stock trades about -0.06 of its potential returns per unit of risk. The Hoteles Bestprice SA is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  149.00  in Hoteles Bestprice SA on September 28, 2024 and sell it today you would earn a total of  151.00  from holding Hoteles Bestprice SA or generate 101.34% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	89.89%
Values	Daily Returns

Pernod Ricard SA  vs.  Hoteles Bestprice SA

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 basic indicators remain somewhat 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.

Hoteles Bestprice

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Hoteles Bestprice SA has generated negative risk-adjusted returns adding no value to investors with long positions. Even with weak performance in the last few months, the Stock's basic indicators remain relatively invariable which may send shares a bit higher in January 2025. The latest agitation may also be a sign of long-running up-swing for the enterprise retail investors.

Pair Trading with Pernod Ricard and Hoteles Bestprice

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

The idea behind Pernod Ricard SA and Hoteles Bestprice 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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.