Correlation Between John B and Danone SA
Can any of the company-specific risk be diversified away by investing in both John B and Danone 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 John B and Danone SA into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between John B Sanfilippo and Danone SA, you can compare the effects of market volatilities on John B and Danone 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 John B with a short position of Danone SA. Check out your portfolio center. Please also check ongoing floating volatility patterns of John B and Danone SA.
Diversification Opportunities for John B and Danone SA
Weak diversification
The 3 months correlation between John and Danone is 0.39. Overlapping area represents the amount of risk that can be diversified away by holding John B Sanfilippo and Danone SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Danone SA and John B 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 John B Sanfilippo are associated (or correlated) with Danone SA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Danone SA has no effect on the direction of John B i.e., John B and Danone SA go up and down completely randomly.
Pair Corralation between John B and Danone SA
Given the investment horizon of 90 days John B is expected to generate 2.28 times less return on investment than Danone SA. But when comparing it to its historical volatility, John B Sanfilippo is 1.29 times less risky than Danone SA. It trades about 0.03 of its potential returns per unit of risk. Danone SA is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest 4,863 in Danone SA on September 14, 2024 and sell it today you would earn a total of 1,880 from holding Danone SA or generate 38.66% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 91.09% |
| Values | Daily Returns |
John B Sanfilippo vs. Danone SA
Performance |
| Timeline |
| John B Sanfilippo |
| Danone SA |
John B and Danone SA Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with John B and Danone SA
The main advantage of trading using opposite John B and Danone SA positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if John B position performs unexpectedly, Danone 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 Danone SA will offset losses from the drop in Danone SA's long position.| John B vs. Lancaster Colony | John B vs. Treehouse Foods | John B vs. Seneca Foods Corp | John B vs. J J Snack |
| Danone SA vs. BRF SA ADR | Danone SA vs. Pilgrims Pride Corp | Danone SA vs. John B Sanfilippo | Danone SA vs. Seneca Foods Corp |
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 Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.
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