Correlation Between Danone SA and AXA SA

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

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

Diversification Opportunities for Danone SA and AXA SA

0.89

Correlation Coefficient

Danone SA  AXA SA

Very poor diversification

The 3 months correlation between Danone and AXA is 0.89. Overlapping area represents the amount of risk that can be diversified away by holding Danone SA and AXA SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AXA SA 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 AXA SA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of AXA SA has no effect on the direction of Danone SA i.e., Danone SA and AXA SA go up and down completely randomly.

Pair Corralation between Danone SA and AXA SA

Assuming the 90 days horizon Danone SA is expected to generate 1.66 times less return on investment than AXA SA. In addition to that, Danone SA is 1.18 times more volatile than AXA SA. It trades about 0.13 of its total potential returns per unit of risk. AXA SA is currently generating about 0.26 per unit of volatility. If you would invest  3,412  in AXA SA on December 28, 2024 and sell it today you would earn a total of  587.00  from holding AXA SA or generate 17.2% return on investment over 90 days.

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

Danone SA  vs.  AXA SA

Danone SA

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Danone SA are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Danone SA may actually be approaching a critical reversion point that can send shares even higher in April 2025.

AXA SA

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in AXA SA are ranked lower than 20 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, AXA SA sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Danone SA and AXA SA

The main advantage of trading using opposite Danone SA and AXA SA positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Danone SA position performs unexpectedly, AXA 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 AXA SA will offset losses from the drop in AXA SA's long position.

The idea behind Danone SA and AXA 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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.