Correlation Between Brown Forman and Pernod Ricard

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

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

Diversification Opportunities for Brown Forman and Pernod Ricard

0.57

Correlation Coefficient

Brown Forman  Pernod Ricard

Very weak diversification

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

Pair Corralation between Brown Forman and Pernod Ricard

Given the investment horizon of 90 days Brown Forman is expected to generate 0.5 times more return on investment than Pernod Ricard. However, Brown Forman is 2.0 times less risky than Pernod Ricard. It trades about 0.07 of its potential returns per unit of risk. Pernod Ricard SA is currently generating about 0.03 per unit of risk. If you would invest  4,340  in Brown Forman on July 10, 2024 and sell it today you would earn a total of  211.00  from holding Brown Forman or generate 4.86% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	96.88%
Values	Daily Returns

Brown Forman  vs.  Pernod Ricard SA

Brown Forman

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Brown Forman are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Brown Forman is not utilizing all of its potentials. The recent stock price disturbance, may contribute to short-term losses for the investors.

Pernod Ricard SA

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Pernod Ricard SA are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable fundamental indicators, Pernod Ricard is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Brown Forman and Pernod Ricard

The main advantage of trading using opposite Brown Forman and Pernod Ricard positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Brown Forman 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 Brown Forman 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 Companies Directory module to evaluate performance of over 100,000 Stocks, Funds, and ETFs against different fundamentals.