Correlation Between Danone SA and Element Nutritional

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

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

Diversification Opportunities for Danone SA and Element Nutritional

0.0

Correlation Coefficient

Danone SA  Element Nutritional

Pay attention - limited upside

The 3 months correlation between Danone and Element is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding Danone SA and Element Nutritional Sciences in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Element Nutritional 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 Element Nutritional. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Element Nutritional has no effect on the direction of Danone SA i.e., Danone SA and Element Nutritional go up and down completely randomly.

Pair Corralation between Danone SA and Element Nutritional

If you would invest  6,605  in Danone SA on December 29, 2024 and sell it today you would earn a total of  1,024  from holding Danone SA or generate 15.5% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	0.0%
Values	Daily Returns

Danone SA  vs.  Element Nutritional Sciences

Danone SA

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Danone SA are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak basic indicators, Danone SA reported solid returns over the last few months and may actually be approaching a breakup point.

Element Nutritional

Risk-Adjusted Performance

Very Weak

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

Pair Trading with Danone SA and Element Nutritional

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

The idea behind Danone SA and Element Nutritional Sciences 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 Portfolio Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.