Correlation Between SPARTAN STORES and Pernod Ricard

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

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

Diversification Opportunities for SPARTAN STORES and Pernod Ricard

-0.66

Correlation Coefficient

SPARTAN STORES  Pernod Ricard

Excellent diversification

The 3 months correlation between SPARTAN and Pernod is -0.66. Overlapping area represents the amount of risk that can be diversified away by holding SPARTAN STORES 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 SPARTAN STORES 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 SPARTAN STORES 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 SPARTAN STORES i.e., SPARTAN STORES and Pernod Ricard go up and down completely randomly.

Pair Corralation between SPARTAN STORES and Pernod Ricard

Assuming the 90 days trading horizon SPARTAN STORES is expected to generate 1.26 times more return on investment than Pernod Ricard. However, SPARTAN STORES is 1.26 times more volatile than Pernod Ricard SA. It trades about 0.01 of its potential returns per unit of risk. Pernod Ricard SA is currently generating about -0.09 per unit of risk. If you would invest  1,830  in SPARTAN STORES on December 21, 2024 and sell it today you would earn a total of  0.00  from holding SPARTAN STORES or generate 0.0% return on investment over 90 days.

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

SPARTAN STORES  vs.  Pernod Ricard SA

SPARTAN STORES

Risk-Adjusted Performance

Very Weak

Over the last 90 days SPARTAN STORES has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound forward-looking indicators, SPARTAN STORES is not utilizing all of its potentials. The newest stock price tumult, may contribute to shorter-term losses for the shareholders.

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 latest fragile performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Pair Trading with SPARTAN STORES and Pernod Ricard

The main advantage of trading using opposite SPARTAN STORES and Pernod Ricard positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if SPARTAN STORES 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 SPARTAN STORES 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 Portfolio Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.