Correlation Between ASSOC BR and Danone SA

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

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

Diversification Opportunities for ASSOC BR and Danone SA

0.24

Correlation Coefficient

ASSOC BR  Danone SA

Modest diversification

The 3 months correlation between ASSOC and Danone is 0.24. Overlapping area represents the amount of risk that can be diversified away by holding ASSOC BR FOODS and Danone SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Danone SA and ASSOC BR 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 ASSOC BR FOODS 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 ASSOC BR i.e., ASSOC BR and Danone SA go up and down completely randomly.

Pair Corralation between ASSOC BR and Danone SA

Assuming the 90 days trading horizon ASSOC BR FOODS is expected to under-perform the Danone SA. In addition to that, ASSOC BR is 2.59 times more volatile than Danone SA. It trades about -0.19 of its total potential returns per unit of risk. Danone SA is currently generating about -0.04 per unit of volatility. If you would invest  6,546  in Danone SA on October 7, 2024 and sell it today you would lose (68.00) from holding Danone SA or give up 1.04% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

ASSOC BR FOODS  vs.  Danone SA

ASSOC BR FOODS

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days ASSOC BR FOODS has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest uncertain performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Danone SA

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Danone SA are ranked lower than 1 (%) 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 ASSOC BR and Danone SA

The main advantage of trading using opposite ASSOC BR and Danone SA positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if ASSOC BR 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 ASSOC BR FOODS 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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.