Correlation Between Pershing Square and Vivendi SA

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

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

Diversification Opportunities for Pershing Square and Vivendi SA

0.3

Correlation Coefficient

Pershing Square  Vivendi SA

Weak diversification

The 3 months correlation between Pershing and Vivendi is 0.3. Overlapping area represents the amount of risk that can be diversified away by holding Pershing Square Holdings and Vivendi SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vivendi SA and Pershing Square 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 Pershing Square Holdings are associated (or correlated) with Vivendi SA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vivendi SA has no effect on the direction of Pershing Square i.e., Pershing Square and Vivendi SA go up and down completely randomly.

Pair Corralation between Pershing Square and Vivendi SA

Assuming the 90 days trading horizon Pershing Square is expected to generate 2147.99 times less return on investment than Vivendi SA. But when comparing it to its historical volatility, Pershing Square Holdings is 107.0 times less risky than Vivendi SA. It trades about 0.01 of its potential returns per unit of risk. Vivendi SA is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest  11.00  in Vivendi SA on September 20, 2024 and sell it today you would earn a total of  249.00  from holding Vivendi SA or generate 2263.64% return on investment over 90 days.

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

Pershing Square Holdings  vs.  Vivendi SA

Pershing Square Holdings

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Pershing Square Holdings has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable technical indicators, Pershing Square is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

Vivendi SA

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Vivendi SA are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Vivendi SA sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Pershing Square and Vivendi SA

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

The idea behind Pershing Square Holdings and Vivendi 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.