Correlation Between Vivendi SA and Pershing Square

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

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

Diversification Opportunities for Vivendi SA and Pershing Square

0.25

Correlation Coefficient

Vivendi SA  Pershing Square

Modest diversification

The 3 months correlation between Vivendi and Pershing is 0.25. Overlapping area represents the amount of risk that can be diversified away by holding Vivendi SA and Pershing Square Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pershing Square Holdings and Vivendi 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 Vivendi SA are associated (or correlated) with Pershing Square. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Pershing Square Holdings has no effect on the direction of Vivendi SA i.e., Vivendi SA and Pershing Square go up and down completely randomly.

Pair Corralation between Vivendi SA and Pershing Square

Assuming the 90 days trading horizon Vivendi SA is expected to generate 59.79 times more return on investment than Pershing Square. However, Vivendi SA is 59.79 times more volatile than Pershing Square Holdings. It trades about 0.09 of its potential returns per unit of risk. Pershing Square Holdings is currently generating about -0.03 per unit of risk. If you would invest  10.00  in Vivendi SA on September 19, 2024 and sell it today you would earn a total of  241.00  from holding Vivendi SA or generate 2410.0% return on investment over 90 days.

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

Vivendi SA  vs.  Pershing Square Holdings

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.

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.

Pair Trading with Vivendi SA and Pershing Square

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

The idea behind Vivendi SA and Pershing Square Holdings 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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.