Correlation Between Danone SA and Coffee Holding
Can any of the company-specific risk be diversified away by investing in both Danone SA and Coffee Holding 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 Coffee Holding into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Danone SA and Coffee Holding Co, you can compare the effects of market volatilities on Danone SA and Coffee Holding 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 Coffee Holding. Check out your portfolio center. Please also check ongoing floating volatility patterns of Danone SA and Coffee Holding.
Diversification Opportunities for Danone SA and Coffee Holding
-0.35 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Danone and Coffee is -0.35. Overlapping area represents the amount of risk that can be diversified away by holding Danone SA and Coffee Holding Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Coffee Holding 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 Coffee Holding. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Coffee Holding has no effect on the direction of Danone SA i.e., Danone SA and Coffee Holding go up and down completely randomly.
Pair Corralation between Danone SA and Coffee Holding
Assuming the 90 days horizon Danone SA is expected to generate 0.19 times more return on investment than Coffee Holding. However, Danone SA is 5.16 times less risky than Coffee Holding. It trades about 0.05 of its potential returns per unit of risk. Coffee Holding Co is currently generating about -0.2 per unit of risk. If you would invest 6,460 in Danone SA on October 14, 2024 and sell it today you would earn a total of 52.00 from holding Danone SA or generate 0.8% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Danone SA vs. Coffee Holding Co
Performance |
| Timeline |
| Danone SA |
| Coffee Holding |
Danone SA and Coffee Holding Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Danone SA and Coffee Holding
The main advantage of trading using opposite Danone SA and Coffee Holding positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Danone SA position performs unexpectedly, Coffee Holding 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 Coffee Holding will offset losses from the drop in Coffee Holding's long position.| Danone SA vs. TOMBADOR IRON LTD | Danone SA vs. Cleanaway Waste Management | Danone SA vs. Hisense Home Appliances | Danone SA vs. CALTAGIRONE EDITORE |
| Coffee Holding vs. Gaztransport Technigaz SA | Coffee Holding vs. Iridium Communications | Coffee Holding vs. MOBILE FACTORY INC | Coffee Holding vs. Zoom Video Communications |
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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.
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