Correlation Between SEB SA and Pernod Ricard

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

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

Diversification Opportunities for SEB SA and Pernod Ricard

0.19

Correlation Coefficient

SEB SA  Pernod Ricard

Average diversification

The 3 months correlation between SEB and Pernod is 0.19. Overlapping area represents the amount of risk that can be diversified away by holding SEB SA 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 SEB SA 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 SEB SA 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 SEB SA i.e., SEB SA and Pernod Ricard go up and down completely randomly.

Pair Corralation between SEB SA and Pernod Ricard

Assuming the 90 days horizon SEB SA is expected to generate 0.92 times more return on investment than Pernod Ricard. However, SEB SA is 1.08 times less risky than Pernod Ricard. It trades about 0.04 of its potential returns per unit of risk. Pernod Ricard SA is currently generating about -0.04 per unit of risk. If you would invest  8,805  in SEB SA on November 20, 2024 and sell it today you would earn a total of  295.00  from holding SEB SA or generate 3.35% return on investment over 90 days.

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

SEB SA  vs.  Pernod Ricard SA

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.

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.

Pair Trading with SEB SA and Pernod Ricard

The main advantage of trading using opposite SEB SA and Pernod Ricard positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if SEB SA 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 SEB SA 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.

Check out your portfolio center.

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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.