Correlation Between Bellring Brands and Danone SA

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

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

Diversification Opportunities for Bellring Brands and Danone SA

-0.82

Correlation Coefficient

Bellring Brands  Danone SA

Pay attention - limited upside

The 3 months correlation between Bellring and Danone is -0.82. Overlapping area represents the amount of risk that can be diversified away by holding Bellring Brands LLC and Danone SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Danone SA and Bellring Brands 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 Bellring Brands LLC 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 Bellring Brands i.e., Bellring Brands and Danone SA go up and down completely randomly.

Pair Corralation between Bellring Brands and Danone SA

Given the investment horizon of 90 days Bellring Brands LLC is expected to generate 1.28 times more return on investment than Danone SA. However, Bellring Brands is 1.28 times more volatile than Danone SA. It trades about 0.09 of its potential returns per unit of risk. Danone SA is currently generating about 0.04 per unit of risk. If you would invest  5,608  in Bellring Brands LLC on September 20, 2024 and sell it today you would earn a total of  2,116  from holding Bellring Brands LLC or generate 37.73% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Significant
Accuracy	91.13%
Values	Daily Returns

Bellring Brands LLC  vs.  Danone SA

Bellring Brands LLC

Risk-Adjusted Performance

26 of 100

Strong

Compared to the overall equity markets, risk-adjusted returns on investments in Bellring Brands LLC are ranked lower than 26 (%) of all global equities and portfolios over the last 90 days. Even with relatively uncertain fundamental drivers, Bellring Brands reported solid returns over the last few months and may actually be approaching a breakup point.

Danone SA

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Danone SA has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Danone SA is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Bellring Brands and Danone SA

The main advantage of trading using opposite Bellring Brands and Danone SA positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Bellring Brands 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 Bellring Brands LLC 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 Portfolio Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.