Correlation Between Pernod Ricard and ITALIAN WINE

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

Diversification Opportunities for Pernod Ricard and ITALIAN WINE

-0.48

Correlation Coefficient

Pernod Ricard  ITALIAN WINE

Very good diversification

The 3 months correlation between Pernod and ITALIAN is -0.48. Overlapping area represents the amount of risk that can be diversified away by holding Pernod Ricard SA and ITALIAN WINE BRANDS in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ITALIAN WINE BRANDS 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 ITALIAN WINE. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ITALIAN WINE BRANDS has no effect on the direction of Pernod Ricard i.e., Pernod Ricard and ITALIAN WINE go up and down completely randomly.

Pair Corralation between Pernod Ricard and ITALIAN WINE

Assuming the 90 days trading horizon Pernod Ricard SA is expected to generate 2.22 times more return on investment than ITALIAN WINE. However, Pernod Ricard is 2.22 times more volatile than ITALIAN WINE BRANDS. It trades about 0.03 of its potential returns per unit of risk. ITALIAN WINE BRANDS is currently generating about 0.0 per unit of risk. If you would invest  10,710  in Pernod Ricard SA on September 25, 2024 and sell it today you would earn a total of  60.00  from holding Pernod Ricard SA or generate 0.56% return on investment over 90 days.

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

Pernod Ricard SA  vs.  ITALIAN WINE BRANDS

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. In spite of uncertain performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in January 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

ITALIAN WINE BRANDS

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in ITALIAN WINE BRANDS are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain basic indicators, ITALIAN WINE may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Pernod Ricard and ITALIAN WINE

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

The idea behind Pernod Ricard SA and ITALIAN WINE BRANDS 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 Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.