Correlation Between Pure Storage and Danone SA

Can any of the company-specific risk be diversified away by investing in both Pure Storage 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 Pure Storage and Danone SA into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Pure Storage and Danone SA, you can compare the effects of market volatilities on Pure Storage 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 Pure Storage with a short position of Danone SA. Check out your portfolio center. Please also check ongoing floating volatility patterns of Pure Storage and Danone SA.

Diversification Opportunities for Pure Storage and Danone SA

-0.29

Correlation Coefficient

Pure Storage  Danone SA

Very good diversification

The 3 months correlation between Pure and Danone is -0.29. Overlapping area represents the amount of risk that can be diversified away by holding Pure Storage and Danone SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Danone SA and Pure Storage 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 Pure Storage 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 Pure Storage i.e., Pure Storage and Danone SA go up and down completely randomly.

Pair Corralation between Pure Storage and Danone SA

Assuming the 90 days horizon Pure Storage is expected to generate 4.94 times more return on investment than Danone SA. However, Pure Storage is 4.94 times more volatile than Danone SA. It trades about 0.12 of its potential returns per unit of risk. Danone SA is currently generating about 0.03 per unit of risk. If you would invest  4,784  in Pure Storage on October 9, 2024 and sell it today you would earn a total of  1,308  from holding Pure Storage or generate 27.34% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.33%
Values	Daily Returns

Pure Storage  vs.  Danone SA

Pure Storage

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Pure Storage are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain basic indicators, Pure Storage reported solid returns over the last few months and may actually be approaching a breakup point.

Danone SA

Risk-Adjusted Performance

2 of 100

Very Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Danone SA are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, Danone SA is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Pure Storage and Danone SA

The main advantage of trading using opposite Pure Storage and Danone SA positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Pure Storage 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.

The idea behind Pure Storage and Danone 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.

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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 ETF Categories module to list of ETF categories grouped based on various criteria, such as the investment strategy or type of investments.