Correlation Between Pernod Ricard and Diageo PLC
Can any of the company-specific risk be diversified away by investing in both Pernod Ricard and Diageo PLC 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 Diageo PLC 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 Diageo PLC ADR, you can compare the effects of market volatilities on Pernod Ricard and Diageo PLC 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 Diageo PLC. Check out your portfolio center. Please also check ongoing floating volatility patterns of Pernod Ricard and Diageo PLC.
Diversification Opportunities for Pernod Ricard and Diageo PLC
0.87 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Pernod and Diageo is 0.87. Overlapping area represents the amount of risk that can be diversified away by holding Pernod Ricard SA and Diageo PLC ADR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Diageo PLC ADR 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 Diageo PLC. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Diageo PLC ADR has no effect on the direction of Pernod Ricard i.e., Pernod Ricard and Diageo PLC go up and down completely randomly.
Pair Corralation between Pernod Ricard and Diageo PLC
Assuming the 90 days horizon Pernod Ricard SA is expected to under-perform the Diageo PLC. In addition to that, Pernod Ricard is 1.84 times more volatile than Diageo PLC ADR. It trades about -0.07 of its total potential returns per unit of risk. Diageo PLC ADR is currently generating about -0.05 per unit of volatility. If you would invest 14,011 in Diageo PLC ADR on August 28, 2024 and sell it today you would lose (1,972) from holding Diageo PLC ADR or give up 14.07% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 99.52% |
| Values | Daily Returns |
Pernod Ricard SA vs. Diageo PLC ADR
Performance |
| Timeline |
| Pernod Ricard SA |
| Diageo PLC ADR |
Pernod Ricard and Diageo PLC Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Pernod Ricard and Diageo PLC
The main advantage of trading using opposite Pernod Ricard and Diageo PLC positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Pernod Ricard position performs unexpectedly, Diageo PLC 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 Diageo PLC will offset losses from the drop in Diageo PLC's long position.| Pernod Ricard vs. Remy Cointreau SA | Pernod Ricard vs. Treasury Wine Estates | Pernod Ricard vs. MGP Ingredients | Pernod Ricard vs. Naked Wines plc |
| Diageo PLC vs. Brown Forman | Diageo PLC vs. MGP Ingredients | Diageo PLC vs. Duckhorn Portfolio | Diageo PLC vs. Brown Forman |
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 Global Correlations module to find global opportunities by holding instruments from different markets.
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