Correlation Between Companhia Brasileira and Pernod Ricard

Can any of the company-specific risk be diversified away by investing in both Companhia Brasileira 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 Companhia Brasileira and Pernod Ricard into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Companhia Brasileira De and Pernod Ricard SA, you can compare the effects of market volatilities on Companhia Brasileira 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 Companhia Brasileira with a short position of Pernod Ricard. Check out your portfolio center. Please also check ongoing floating volatility patterns of Companhia Brasileira and Pernod Ricard.

Diversification Opportunities for Companhia Brasileira and Pernod Ricard

0.57

Correlation Coefficient

Companhia Brasileira  Pernod Ricard

Very weak diversification

The 3 months correlation between Companhia and Pernod is 0.57. Overlapping area represents the amount of risk that can be diversified away by holding Companhia Brasileira De 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 Companhia Brasileira 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 Companhia Brasileira De 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 Companhia Brasileira i.e., Companhia Brasileira and Pernod Ricard go up and down completely randomly.

Pair Corralation between Companhia Brasileira and Pernod Ricard

If you would invest (100.00) in Companhia Brasileira De on March 14, 2024 and sell it today you would earn a total of  100.00  from holding Companhia Brasileira De or generate -100.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	0.0%
Values	Daily Returns

Companhia Brasileira De  vs.  Pernod Ricard SA

Companhia Brasileira

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Companhia Brasileira De has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's fundamental drivers remain rather sound which may send shares a bit higher in July 2024. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Pernod Ricard SA

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Pernod Ricard SA has generated negative risk-adjusted returns adding no value to investors with long positions. Despite unsteady performance in the last few months, the Stock's fundamental indicators remain nearly stable which may send shares a bit higher in July 2024. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with Companhia Brasileira and Pernod Ricard

The main advantage of trading using opposite Companhia Brasileira and Pernod Ricard positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Companhia Brasileira 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.

The idea behind Companhia Brasileira De and Pernod Ricard SA pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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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 Transaction History module to view history of all your transactions and understand their impact on performance.