Correlation Between DATATEC and Danone SA

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

By analyzing existing cross correlation between DATATEC LTD 2 and Danone SA, you can compare the effects of market volatilities on DATATEC 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 DATATEC with a short position of Danone SA. Check out your portfolio center. Please also check ongoing floating volatility patterns of DATATEC and Danone SA.

Diversification Opportunities for DATATEC and Danone SA

0.11

Correlation Coefficient

DATATEC  Danone SA

Average diversification

The 3 months correlation between DATATEC and Danone is 0.11. Overlapping area represents the amount of risk that can be diversified away by holding DATATEC LTD 2 and Danone SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Danone SA and DATATEC 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 DATATEC LTD 2 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 DATATEC i.e., DATATEC and Danone SA go up and down completely randomly.

Pair Corralation between DATATEC and Danone SA

Assuming the 90 days trading horizon DATATEC LTD 2 is expected to generate 1.82 times more return on investment than Danone SA. However, DATATEC is 1.82 times more volatile than Danone SA. It trades about 0.1 of its potential returns per unit of risk. Danone SA is currently generating about 0.16 per unit of risk. If you would invest  440.00  in DATATEC LTD 2 on December 24, 2024 and sell it today you would earn a total of  52.00  from holding DATATEC LTD 2 or generate 11.82% return on investment over 90 days.

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

DATATEC LTD 2  vs.  Danone SA

DATATEC LTD 2

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in DATATEC LTD 2 are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, DATATEC reported solid returns over the last few months and may actually be approaching a breakup point.

Danone SA

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Danone SA are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unsteady basic indicators, Danone SA may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with DATATEC and Danone SA

The main advantage of trading using opposite DATATEC and Danone SA positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if DATATEC 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 DATATEC LTD 2 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.

Check out your portfolio center.

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 Stock Screener module to find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook..