Correlation Between Danone SA and Oeneo SA

Can any of the company-specific risk be diversified away by investing in both Danone SA and Oeneo 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 Oeneo 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 Oeneo SA, you can compare the effects of market volatilities on Danone SA and Oeneo 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 Oeneo SA. Check out your portfolio center. Please also check ongoing floating volatility patterns of Danone SA and Oeneo SA.

Diversification Opportunities for Danone SA and Oeneo SA

0.08

Correlation Coefficient

Danone SA  Oeneo SA

Significant diversification

The 3 months correlation between Danone and Oeneo is 0.08. Overlapping area represents the amount of risk that can be diversified away by holding Danone SA and Oeneo SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Oeneo 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 Oeneo SA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Oeneo SA has no effect on the direction of Danone SA i.e., Danone SA and Oeneo SA go up and down completely randomly.

Pair Corralation between Danone SA and Oeneo SA

Assuming the 90 days horizon Danone SA is expected to generate 0.61 times more return on investment than Oeneo SA. However, Danone SA is 1.64 times less risky than Oeneo SA. It trades about 0.08 of its potential returns per unit of risk. Oeneo SA is currently generating about -0.04 per unit of risk. If you would invest  4,676  in Danone SA on October 5, 2024 and sell it today you would earn a total of  1,812  from holding Danone SA or generate 38.75% return on investment over 90 days.

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

Danone SA  vs.  Oeneo SA

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. Despite somewhat strong basic indicators, Danone SA is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Oeneo SA

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Oeneo SA has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Oeneo SA 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 Oeneo SA

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

The idea behind Danone SA and Oeneo 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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.