Correlation Between Danone SA and Arcure SA
Can any of the company-specific risk be diversified away by investing in both Danone SA and Arcure 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 Danone SA and Arcure SA into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Danone SA and Arcure SA, you can compare the effects of market volatilities on Danone SA and Arcure 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 Danone SA with a short position of Arcure SA. Check out your portfolio center. Please also check ongoing floating volatility patterns of Danone SA and Arcure SA.
Diversification Opportunities for Danone SA and Arcure SA
Very good diversification
The 3 months correlation between Danone and Arcure is -0.37. Overlapping area represents the amount of risk that can be diversified away by holding Danone SA and Arcure SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Arcure SA and Danone SA 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 Danone SA are associated (or correlated) with Arcure SA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Arcure SA has no effect on the direction of Danone SA i.e., Danone SA and Arcure SA go up and down completely randomly.
Pair Corralation between Danone SA and Arcure SA
Assuming the 90 days horizon Danone SA is expected to generate 0.22 times more return on investment than Arcure SA. However, Danone SA is 4.54 times less risky than Arcure SA. It trades about 0.08 of its potential returns per unit of risk. Arcure SA is currently generating about 0.01 per unit of risk. If you would invest 5,924 in Danone SA on August 31, 2024 and sell it today you would earn a total of 546.00 from holding Danone SA or generate 9.22% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 99.23% |
| Values | Daily Returns |
Danone SA vs. Arcure SA
Performance |
| Timeline |
| Danone SA |
| Arcure SA |
Danone SA and Arcure SA Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Danone SA and Arcure SA
The main advantage of trading using opposite Danone SA and Arcure SA positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Danone SA position performs unexpectedly, Arcure 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 Arcure SA will offset losses from the drop in Arcure SA's long position.The idea behind Danone SA and Arcure 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.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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.
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