Correlation Between Compagnie and Pernod Ricard

Can any of the company-specific risk be diversified away by investing in both Compagnie and Pernod Ricard 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 Compagnie and Pernod Ricard into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Compagnie de Saint Gobain and Pernod Ricard SA, you can compare the effects of market volatilities on Compagnie and Pernod Ricard 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 Compagnie with a short position of Pernod Ricard. Check out your portfolio center. Please also check ongoing floating volatility patterns of Compagnie and Pernod Ricard.

Diversification Opportunities for Compagnie and Pernod Ricard

-0.67

Correlation Coefficient

Compagnie  Pernod Ricard

Excellent diversification

The 3 months correlation between Compagnie and Pernod is -0.67. Overlapping area represents the amount of risk that can be diversified away by holding Compagnie de Saint Gobain and Pernod Ricard SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pernod Ricard SA and Compagnie 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 Compagnie de Saint Gobain are associated (or correlated) with Pernod Ricard. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Pernod Ricard SA has no effect on the direction of Compagnie i.e., Compagnie and Pernod Ricard go up and down completely randomly.

Pair Corralation between Compagnie and Pernod Ricard

Assuming the 90 days trading horizon Compagnie de Saint Gobain is expected to generate 0.84 times more return on investment than Pernod Ricard. However, Compagnie de Saint Gobain is 1.19 times less risky than Pernod Ricard. It trades about 0.09 of its potential returns per unit of risk. Pernod Ricard SA is currently generating about -0.15 per unit of risk. If you would invest  7,954  in Compagnie de Saint Gobain on August 31, 2024 and sell it today you would earn a total of  680.00  from holding Compagnie de Saint Gobain or generate 8.55% return on investment over 90 days.

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

Compagnie de Saint Gobain  vs.  Pernod Ricard SA

Compagnie de Saint

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Compagnie de Saint Gobain are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Compagnie may actually be approaching a critical reversion point that can send shares even higher in December 2024.

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 December 2024. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with Compagnie and Pernod Ricard

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

The idea behind Compagnie de Saint Gobain and Pernod Ricard 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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..