Correlation Between Danone SA and TreeHouse Foods
Can any of the company-specific risk be diversified away by investing in both Danone SA and TreeHouse Foods 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 TreeHouse Foods into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Danone SA and TreeHouse Foods, you can compare the effects of market volatilities on Danone SA and TreeHouse Foods 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 TreeHouse Foods. Check out your portfolio center. Please also check ongoing floating volatility patterns of Danone SA and TreeHouse Foods.
Diversification Opportunities for Danone SA and TreeHouse Foods
0.25 | Correlation Coefficient |
Modest diversification
The 3 months correlation between Danone and TreeHouse is 0.25. Overlapping area represents the amount of risk that can be diversified away by holding Danone SA and TreeHouse Foods in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on TreeHouse Foods 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 TreeHouse Foods. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of TreeHouse Foods has no effect on the direction of Danone SA i.e., Danone SA and TreeHouse Foods go up and down completely randomly.
Pair Corralation between Danone SA and TreeHouse Foods
Assuming the 90 days trading horizon Danone SA is expected to generate 0.34 times more return on investment than TreeHouse Foods. However, Danone SA is 2.92 times less risky than TreeHouse Foods. It trades about -0.02 of its potential returns per unit of risk. TreeHouse Foods is currently generating about -0.06 per unit of risk. If you would invest 6,544 in Danone SA on October 26, 2024 and sell it today you would lose (40.00) from holding Danone SA or give up 0.61% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Danone SA vs. TreeHouse Foods
Performance |
| Timeline |
| Danone SA |
| TreeHouse Foods |
Danone SA and TreeHouse Foods Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Danone SA and TreeHouse Foods
The main advantage of trading using opposite Danone SA and TreeHouse Foods positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Danone SA position performs unexpectedly, TreeHouse Foods 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 TreeHouse Foods will offset losses from the drop in TreeHouse Foods' long position.| Danone SA vs. Alaska Air Group | Danone SA vs. SEALED AIR | Danone SA vs. CHINA SOUTHN AIR H | Danone SA vs. TreeHouse Foods |
| TreeHouse Foods vs. General Mills | TreeHouse Foods vs. Danone SA | TreeHouse Foods vs. Hormel Foods | TreeHouse Foods vs. Kellogg Company |
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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.
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