Correlation Between Danone SA and Compagnie
Can any of the company-specific risk be diversified away by investing in both Danone SA and Compagnie 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 Compagnie into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Danone SA and Compagnie de Saint Gobain, you can compare the effects of market volatilities on Danone SA and Compagnie 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 Compagnie. Check out your portfolio center. Please also check ongoing floating volatility patterns of Danone SA and Compagnie.
Diversification Opportunities for Danone SA and Compagnie
Weak diversification
The 3 months correlation between Danone and Compagnie is 0.36. Overlapping area represents the amount of risk that can be diversified away by holding Danone SA and Compagnie de Saint Gobain in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Compagnie de Saint 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 Compagnie. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Compagnie de Saint has no effect on the direction of Danone SA i.e., Danone SA and Compagnie go up and down completely randomly.
Pair Corralation between Danone SA and Compagnie
Assuming the 90 days horizon Danone SA is expected to generate 3.03 times less return on investment than Compagnie. But when comparing it to its historical volatility, Danone SA is 1.77 times less risky than Compagnie. It trades about 0.08 of its potential returns per unit of risk. Compagnie de Saint Gobain is currently generating about 0.14 of returns per unit of risk over similar time horizon. If you would invest 7,760 in Compagnie de Saint Gobain on August 28, 2024 and sell it today you would earn a total of 988.00 from holding Compagnie de Saint Gobain or generate 12.73% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Danone SA vs. Compagnie de Saint Gobain
Performance |
| Timeline |
| Danone SA |
| Compagnie de Saint |
Danone SA and Compagnie Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Danone SA and Compagnie
The main advantage of trading using opposite Danone SA and Compagnie positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Danone SA position performs unexpectedly, Compagnie 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 Compagnie will offset losses from the drop in Compagnie's long position.The idea behind Danone SA and Compagnie de Saint Gobain 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.| Compagnie vs. Vinci SA | Compagnie vs. Air Liquide SA | Compagnie vs. Compagnie Generale des | Compagnie vs. Bouygues SA |
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 Portfolio Dashboard module to portfolio dashboard that provides centralized access to all your investments.
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