Correlation Between Pernod Ricard and Nexans SA

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

Diversification Opportunities for Pernod Ricard and Nexans SA

0.78

Correlation Coefficient

Pernod Ricard  Nexans SA

Poor diversification

The 3 months correlation between Pernod and Nexans is 0.78. Overlapping area represents the amount of risk that can be diversified away by holding Pernod Ricard SA and Nexans SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nexans 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 Nexans SA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nexans SA has no effect on the direction of Pernod Ricard i.e., Pernod Ricard and Nexans SA go up and down completely randomly.

Pair Corralation between Pernod Ricard and Nexans SA

Assuming the 90 days horizon Pernod Ricard SA is expected to generate 1.04 times more return on investment than Nexans SA. However, Pernod Ricard is 1.04 times more volatile than Nexans SA. It trades about 0.07 of its potential returns per unit of risk. Nexans SA is currently generating about -0.12 per unit of risk. If you would invest  10,575  in Pernod Ricard SA on September 27, 2024 and sell it today you would earn a total of  185.00  from holding Pernod Ricard SA or generate 1.75% return on investment over 90 days.

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

Pernod Ricard SA  vs.  Nexans 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.

Nexans SA

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Nexans 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.

Pair Trading with Pernod Ricard and Nexans SA

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

The idea behind Pernod Ricard SA and Nexans 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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.