Correlation Between Pernod Ricard and SEB SA

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

Diversification Opportunities for Pernod Ricard and SEB SA

0.04

Correlation Coefficient

Pernod Ricard  SEB SA

Significant diversification

The 3 months correlation between Pernod and SEB is 0.04. Overlapping area represents the amount of risk that can be diversified away by holding Pernod Ricard SA and SEB SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SEB 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 SEB SA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SEB SA has no effect on the direction of Pernod Ricard i.e., Pernod Ricard and SEB SA go up and down completely randomly.

Pair Corralation between Pernod Ricard and SEB SA

Assuming the 90 days horizon Pernod Ricard SA is expected to under-perform the SEB SA. In addition to that, Pernod Ricard is 1.05 times more volatile than SEB SA. It trades about -0.04 of its total potential returns per unit of risk. SEB SA is currently generating about 0.05 per unit of volatility. If you would invest  8,980  in SEB SA on November 29, 2024 and sell it today you would earn a total of  365.00  from holding SEB SA or generate 4.06% return on investment over 90 days.

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

Pernod Ricard SA  vs.  SEB 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.

SEB SA

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in SEB SA are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, SEB SA is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Pernod Ricard and SEB SA

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

The idea behind Pernod Ricard SA and SEB 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 Bonds Directory module to find actively traded corporate debentures issued by US companies.