Correlation Between Pernod Ricard and Brown Forman
Can any of the company-specific risk be diversified away by investing in both Pernod Ricard and Brown Forman 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 Brown Forman 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 Brown Forman, you can compare the effects of market volatilities on Pernod Ricard and Brown Forman 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 Brown Forman. Check out your portfolio center. Please also check ongoing floating volatility patterns of Pernod Ricard and Brown Forman.
Diversification Opportunities for Pernod Ricard and Brown Forman
0.8 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Pernod and Brown is 0.8. Overlapping area represents the amount of risk that can be diversified away by holding Pernod Ricard SA and Brown Forman in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Brown Forman 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 Brown Forman. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Brown Forman has no effect on the direction of Pernod Ricard i.e., Pernod Ricard and Brown Forman go up and down completely randomly.
Pair Corralation between Pernod Ricard and Brown Forman
Assuming the 90 days horizon Pernod Ricard SA is expected to generate 1.54 times more return on investment than Brown Forman. However, Pernod Ricard is 1.54 times more volatile than Brown Forman. It trades about -0.03 of its potential returns per unit of risk. Brown Forman is currently generating about -0.07 per unit of risk. If you would invest 18,687 in Pernod Ricard SA on August 24, 2024 and sell it today you would lose (7,537) from holding Pernod Ricard SA or give up 40.33% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 98.59% |
| Values | Daily Returns |
Pernod Ricard SA vs. Brown Forman
Performance |
| Timeline |
| Pernod Ricard SA |
| Brown Forman |
Pernod Ricard and Brown Forman Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Pernod Ricard and Brown Forman
The main advantage of trading using opposite Pernod Ricard and Brown Forman positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Pernod Ricard position performs unexpectedly, Brown Forman 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 Brown Forman will offset losses from the drop in Brown Forman's long position.| Pernod Ricard vs. Diageo PLC ADR | Pernod Ricard vs. Constellation Brands Class | Pernod Ricard vs. Thai Beverage PCL | Pernod Ricard vs. Morningstar Unconstrained Allocation |
| Brown Forman vs. MGP Ingredients | Brown Forman vs. Diageo PLC ADR | Brown Forman vs. Constellation Brands Class | Brown Forman vs. Duckhorn Portfolio |
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 Financial Widgets module to easily integrated Macroaxis content with over 30 different plug-and-play financial widgets.
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