Correlation Between Danone SA and Compagnie Generale

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

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

Diversification Opportunities for Danone SA and Compagnie Generale

0.73

Correlation Coefficient

Danone SA  Compagnie Generale

Poor diversification

The 3 months correlation between Danone and Compagnie is 0.73. Overlapping area represents the amount of risk that can be diversified away by holding Danone SA and Compagnie Generale des in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Compagnie Generale des 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 Compagnie Generale. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Compagnie Generale des has no effect on the direction of Danone SA i.e., Danone SA and Compagnie Generale go up and down completely randomly.

Pair Corralation between Danone SA and Compagnie Generale

Assuming the 90 days horizon Danone SA is expected to generate 0.71 times more return on investment than Compagnie Generale. However, Danone SA is 1.4 times less risky than Compagnie Generale. It trades about 0.13 of its potential returns per unit of risk. Compagnie Generale des is currently generating about 0.05 per unit of risk. If you would invest  6,450  in Danone SA on December 30, 2024 and sell it today you would earn a total of  632.00  from holding Danone SA or generate 9.8% return on investment over 90 days.

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

Danone SA  vs.  Compagnie Generale des

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.

Compagnie Generale des

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Compagnie Generale des are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Compagnie Generale is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Danone SA and Compagnie Generale

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

The idea behind Danone SA and Compagnie Generale des 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 Portfolio Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.