Correlation Between Danone SA and DONGJIANG ENVIRONMENTAL

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

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

Diversification Opportunities for Danone SA and DONGJIANG ENVIRONMENTAL

0.36

Correlation Coefficient

Danone SA  DONGJIANG ENVIRONMENTAL

Weak diversification

The 3 months correlation between Danone and DONGJIANG is 0.36. Overlapping area represents the amount of risk that can be diversified away by holding Danone SA and DONGJIANG ENVIRONMENTAL H in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on DONGJIANG ENVIRONMENTAL 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 DONGJIANG ENVIRONMENTAL. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of DONGJIANG ENVIRONMENTAL has no effect on the direction of Danone SA i.e., Danone SA and DONGJIANG ENVIRONMENTAL go up and down completely randomly.

Pair Corralation between Danone SA and DONGJIANG ENVIRONMENTAL

Assuming the 90 days trading horizon Danone SA is expected to generate 0.17 times more return on investment than DONGJIANG ENVIRONMENTAL. However, Danone SA is 5.87 times less risky than DONGJIANG ENVIRONMENTAL. It trades about 0.03 of its potential returns per unit of risk. DONGJIANG ENVIRONMENTAL H is currently generating about -0.01 per unit of risk. If you would invest  6,476  in Danone SA on October 10, 2024 and sell it today you would earn a total of  78.00  from holding Danone SA or generate 1.2% return on investment over 90 days.

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

Danone SA  vs.  DONGJIANG ENVIRONMENTAL H

Danone SA

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Danone SA are ranked lower than 2 (%) 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.

DONGJIANG ENVIRONMENTAL

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Danone SA and DONGJIANG ENVIRONMENTAL

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

The idea behind Danone SA and DONGJIANG ENVIRONMENTAL H 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 File Import module to quickly import all of your third-party portfolios from your local drive in csv format.