Correlation Between General Mills and Danone SA

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

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

Diversification Opportunities for General Mills and Danone SA

0.63

Correlation Coefficient

General Mills  Danone SA

Poor diversification

The 3 months correlation between General and Danone is 0.63. Overlapping area represents the amount of risk that can be diversified away by holding General Mills and Danone SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Danone SA and General Mills 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 General Mills 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 General Mills i.e., General Mills and Danone SA go up and down completely randomly.

Pair Corralation between General Mills and Danone SA

Considering the 90-day investment horizon General Mills is expected to under-perform the Danone SA. But the stock apears to be less risky and, when comparing its historical volatility, General Mills is 1.87 times less risky than Danone SA. The stock trades about -0.03 of its potential returns per unit of risk. The Danone SA is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  4,937  in Danone SA on September 20, 2024 and sell it today you would earn a total of  1,678  from holding Danone SA or generate 33.99% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	90.93%
Values	Daily Returns

General Mills  vs.  Danone SA

General Mills

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days General Mills has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's forward indicators remain comparatively stable which may send shares a bit higher in January 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

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 latest weak performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Pair Trading with General Mills and Danone SA

The main advantage of trading using opposite General Mills and Danone SA positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if General Mills 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 General Mills 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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.