Correlation Between Diageo PLC and Pernod Ricard
Can any of the company-specific risk be diversified away by investing in both Diageo PLC 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 Diageo PLC and Pernod Ricard into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Diageo PLC ADR and Pernod Ricard SA, you can compare the effects of market volatilities on Diageo PLC 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 Diageo PLC with a short position of Pernod Ricard. Check out your portfolio center. Please also check ongoing floating volatility patterns of Diageo PLC and Pernod Ricard.
Diversification Opportunities for Diageo PLC and Pernod Ricard
0.86 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Diageo and Pernod is 0.86. Overlapping area represents the amount of risk that can be diversified away by holding Diageo PLC ADR 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 Diageo PLC 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 Diageo PLC ADR 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 Diageo PLC i.e., Diageo PLC and Pernod Ricard go up and down completely randomly.
Pair Corralation between Diageo PLC and Pernod Ricard
Considering the 90-day investment horizon Diageo PLC ADR is expected to generate 0.43 times more return on investment than Pernod Ricard. However, Diageo PLC ADR is 2.33 times less risky than Pernod Ricard. It trades about -0.37 of its potential returns per unit of risk. Pernod Ricard SA is currently generating about -0.25 per unit of risk. If you would invest 13,419 in Diageo PLC ADR on August 24, 2024 and sell it today you would lose (1,410) from holding Diageo PLC ADR or give up 10.51% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Diageo PLC ADR vs. Pernod Ricard SA
Performance |
| Timeline |
| Diageo PLC ADR |
| Pernod Ricard SA |
Diageo PLC and Pernod Ricard Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Diageo PLC and Pernod Ricard
The main advantage of trading using opposite Diageo PLC and Pernod Ricard positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Diageo PLC 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.| Diageo PLC vs. Brown Forman | Diageo PLC vs. MGP Ingredients | Diageo PLC vs. Duckhorn Portfolio | Diageo PLC vs. Brown Forman |
| Pernod Ricard vs. Diageo PLC ADR | Pernod Ricard vs. Constellation Brands Class | Pernod Ricard vs. Thai Beverage PCL | Pernod Ricard vs. Morningstar Unconstrained Allocation |
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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.
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