Correlation Between Pernod Ricard and Prodways Group
Can any of the company-specific risk be diversified away by investing in both Pernod Ricard and Prodways Group 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 Prodways Group 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 Prodways Group SA, you can compare the effects of market volatilities on Pernod Ricard and Prodways Group 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 Prodways Group. Check out your portfolio center. Please also check ongoing floating volatility patterns of Pernod Ricard and Prodways Group.
Diversification Opportunities for Pernod Ricard and Prodways Group
0.83 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Pernod and Prodways is 0.83. Overlapping area represents the amount of risk that can be diversified away by holding Pernod Ricard SA and Prodways Group SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Prodways Group SA 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 Prodways Group. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Prodways Group SA has no effect on the direction of Pernod Ricard i.e., Pernod Ricard and Prodways Group go up and down completely randomly.
Pair Corralation between Pernod Ricard and Prodways Group
Assuming the 90 days horizon Pernod Ricard SA is expected to generate 0.78 times more return on investment than Prodways Group. However, Pernod Ricard SA is 1.28 times less risky than Prodways Group. It trades about -0.12 of its potential returns per unit of risk. Prodways Group SA is currently generating about -0.12 per unit of risk. If you would invest 12,044 in Pernod Ricard SA on September 6, 2024 and sell it today you would lose (1,614) from holding Pernod Ricard SA or give up 13.4% of portfolio value over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Strong |
Accuracy | 100.0% |
Values | Daily Returns |
Pernod Ricard SA vs. Prodways Group SA
Performance |
Timeline |
Pernod Ricard SA |
Prodways Group SA |
Pernod Ricard and Prodways Group Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Pernod Ricard and Prodways Group
The main advantage of trading using opposite Pernod Ricard and Prodways Group positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Pernod Ricard position performs unexpectedly, Prodways Group 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 Prodways Group will offset losses from the drop in Prodways Group's long position.Pernod Ricard vs. SEB SA | Pernod Ricard vs. Sodexo SA | Pernod Ricard vs. Wendel | Pernod Ricard vs. Socit BIC SA |
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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 Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.
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