Correlation Between Pernod Ricard and LOreal SA
Can any of the company-specific risk be diversified away by investing in both Pernod Ricard and LOreal SA 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 LOreal SA 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 LOreal SA, you can compare the effects of market volatilities on Pernod Ricard and LOreal SA 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 LOreal SA. Check out your portfolio center. Please also check ongoing floating volatility patterns of Pernod Ricard and LOreal SA.
Diversification Opportunities for Pernod Ricard and LOreal SA
0.92 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Pernod and LOreal is 0.92. Overlapping area represents the amount of risk that can be diversified away by holding Pernod Ricard SA and LOreal SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on LOreal SA 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 LOreal SA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of LOreal SA has no effect on the direction of Pernod Ricard i.e., Pernod Ricard and LOreal SA go up and down completely randomly.
Pair Corralation between Pernod Ricard and LOreal SA
Assuming the 90 days horizon Pernod Ricard SA is expected to under-perform the LOreal SA. In addition to that, Pernod Ricard is 1.02 times more volatile than LOreal SA. It trades about -0.08 of its total potential returns per unit of risk. LOreal SA is currently generating about -0.01 per unit of volatility. If you would invest 37,089 in LOreal SA on August 27, 2024 and sell it today you would lose (4,184) from holding LOreal SA or give up 11.28% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Pernod Ricard SA vs. LOreal SA
Performance |
| Timeline |
| Pernod Ricard SA |
| LOreal SA |
Pernod Ricard and LOreal SA Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Pernod Ricard and LOreal SA
The main advantage of trading using opposite Pernod Ricard and LOreal SA positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Pernod Ricard position performs unexpectedly, LOreal SA 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 LOreal SA will offset losses from the drop in LOreal SA's long position.| Pernod Ricard vs. LOreal SA | Pernod Ricard vs. Danone SA | Pernod Ricard vs. Compagnie Generale des | Pernod Ricard vs. Air Liquide SA |
| LOreal SA vs. LVMH Mot Hennessy | LOreal SA vs. Danone SA | LOreal SA vs. Air Liquide SA | LOreal SA vs. Hermes International SCA |
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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.
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