Correlation Between Danone PK and Orkla ASA

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

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

Diversification Opportunities for Danone PK and Orkla ASA

-0.84

Correlation Coefficient

Danone PK  Orkla ASA

Pay attention - limited upside

The 3 months correlation between Danone and Orkla is -0.84. Overlapping area represents the amount of risk that can be diversified away by holding Danone PK and Orkla ASA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Orkla ASA and Danone PK 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 PK are associated (or correlated) with Orkla ASA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Orkla ASA has no effect on the direction of Danone PK i.e., Danone PK and Orkla ASA go up and down completely randomly.

Pair Corralation between Danone PK and Orkla ASA

If you would invest  820.00  in Orkla ASA on September 12, 2024 and sell it today you would earn a total of  68.00  from holding Orkla ASA or generate 8.29% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Significant
Accuracy	1.59%
Values	Daily Returns

Danone PK  vs.  Orkla ASA

Danone PK

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Danone PK has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong basic indicators, Danone PK is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Orkla ASA

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Orkla ASA are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile essential indicators, Orkla ASA may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Danone PK and Orkla ASA

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

The idea behind Danone PK and Orkla ASA 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 Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.