Correlation Between MGP Ingredients and Pernod Ricard
Can any of the company-specific risk be diversified away by investing in both MGP Ingredients 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 MGP Ingredients and Pernod Ricard into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between MGP Ingredients and Pernod Ricard SA, you can compare the effects of market volatilities on MGP Ingredients 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 MGP Ingredients with a short position of Pernod Ricard. Check out your portfolio center. Please also check ongoing floating volatility patterns of MGP Ingredients and Pernod Ricard.
Diversification Opportunities for MGP Ingredients and Pernod Ricard
0.84 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between MGP and Pernod is 0.84. Overlapping area represents the amount of risk that can be diversified away by holding MGP Ingredients 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 MGP Ingredients 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 MGP Ingredients 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 MGP Ingredients i.e., MGP Ingredients and Pernod Ricard go up and down completely randomly.
Pair Corralation between MGP Ingredients and Pernod Ricard
Assuming the 90 days trading horizon MGP Ingredients is expected to under-perform the Pernod Ricard. In addition to that, MGP Ingredients is 1.47 times more volatile than Pernod Ricard SA. It trades about -0.06 of its total potential returns per unit of risk. Pernod Ricard SA is currently generating about -0.08 per unit of volatility. If you would invest 20,272 in Pernod Ricard SA on August 29, 2024 and sell it today you would lose (9,717) from holding Pernod Ricard SA or give up 47.93% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 99.75% |
| Values | Daily Returns |
MGP Ingredients vs. Pernod Ricard SA
Performance |
| Timeline |
| MGP Ingredients |
| Pernod Ricard SA |
MGP Ingredients and Pernod Ricard Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with MGP Ingredients and Pernod Ricard
The main advantage of trading using opposite MGP Ingredients and Pernod Ricard positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if MGP Ingredients 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.| MGP Ingredients vs. WisdomTree Investments | MGP Ingredients vs. ETFS Coffee ETC | MGP Ingredients vs. IMAGIN MEDICAL INC | MGP Ingredients vs. Microbot Medical |
| Pernod Ricard vs. Superior Plus Corp | Pernod Ricard vs. NMI Holdings | Pernod Ricard vs. Origin Agritech | Pernod Ricard vs. SIVERS SEMICONDUCTORS AB |
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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.
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