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, 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 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Diageo plc 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 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. But the pink sheet apears to be less risky and, when comparing its historical volatility, Pernod Ricard SA is 1.31 times less risky than Diageo Plc. The pink sheet trades about -0.1 of its potential returns per unit of risk. The Diageo plc is currently generating about -0.02 of returns per unit of risk over similar time horizon. If you would invest 3,208 in Diageo plc on August 28, 2024 and sell it today you would lose (256.00) from holding Diageo plc or give up 7.98% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Pernod Ricard SA vs. Diageo plc
Performance |
| Timeline |
| Pernod Ricard SA |
| Diageo plc |
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. Diageo PLC ADR | Pernod Ricard vs. Constellation Brands Class | Pernod Ricard vs. Morningstar Unconstrained Allocation | Pernod Ricard vs. SEI Investments |
| Diageo Plc vs. Constellation Brands Class | Diageo Plc vs. Brown Forman | Diageo Plc vs. Duckhorn Portfolio | Diageo Plc vs. MGP Ingredients |
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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.
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