Correlation Between Danone SA and Preferred Commerce

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

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

Diversification Opportunities for Danone SA and Preferred Commerce

-0.86

Correlation Coefficient

Danone SA  Preferred Commerce

Pay attention - limited upside

The 3 months correlation between Danone and Preferred is -0.86. Overlapping area represents the amount of risk that can be diversified away by holding Danone SA and Preferred Commerce in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Preferred Commerce 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 Preferred Commerce. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Preferred Commerce has no effect on the direction of Danone SA i.e., Danone SA and Preferred Commerce go up and down completely randomly.

Pair Corralation between Danone SA and Preferred Commerce

Assuming the 90 days horizon Danone SA is expected to under-perform the Preferred Commerce. But the otc stock apears to be less risky and, when comparing its historical volatility, Danone SA is 10.37 times less risky than Preferred Commerce. The otc stock trades about -0.1 of its potential returns per unit of risk. The Preferred Commerce is currently generating about 0.17 of returns per unit of risk over similar time horizon. If you would invest  289.00  in Preferred Commerce on October 15, 2024 and sell it today you would earn a total of  85.00  from holding Preferred Commerce or generate 29.41% return on investment over 90 days.

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

Danone SA  vs.  Preferred Commerce

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.

Preferred Commerce

Risk-Adjusted Performance

30 of 100

Strong

Compared to the overall equity markets, risk-adjusted returns on investments in Preferred Commerce are ranked lower than 30 (%) of all global equities and portfolios over the last 90 days. In spite of fairly conflicting essential indicators, Preferred Commerce showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Danone SA and Preferred Commerce

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

The idea behind Danone SA and Preferred Commerce 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 Earnings Calls module to check upcoming earnings announcements updated hourly across public exchanges.