Correlation Between Danone SA and Glanbia PLC

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Can any of the company-specific risk be diversified away by investing in both Danone SA and Glanbia PLC 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 Glanbia PLC into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Danone SA and Glanbia PLC ADR, you can compare the effects of market volatilities on Danone SA and Glanbia PLC 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 Glanbia PLC. Check out your portfolio center. Please also check ongoing floating volatility patterns of Danone SA and Glanbia PLC.

Diversification Opportunities for Danone SA and Glanbia PLC

DanoneGlanbiaDiversified AwayDanoneGlanbiaDiversified Away100%
0.24
  Correlation Coefficient

Modest diversification

The 3 months correlation between Danone and Glanbia is 0.24. Overlapping area represents the amount of risk that can be diversified away by holding Danone SA and Glanbia PLC ADR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Glanbia PLC ADR 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 Glanbia PLC. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Glanbia PLC ADR has no effect on the direction of Danone SA i.e., Danone SA and Glanbia PLC go up and down completely randomly.

Pair Corralation between Danone SA and Glanbia PLC

If you would invest  9,475  in Glanbia PLC ADR on September 29, 2024 and sell it today you would earn a total of  0.00  from holding Glanbia PLC ADR or generate 0.0% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthVery Weak
Accuracy1.59%
ValuesDaily Returns

Danone SA  vs.  Glanbia PLC ADR

 Performance 
JavaScript chart by amCharts 3.21.15OctNovDec -505
JavaScript chart by amCharts 3.21.15GPDNF GLAPY
       Timeline  
Danone SA 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
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.
JavaScript chart by amCharts 3.21.15NovDecDec666768697071727374
Glanbia PLC ADR 

Risk-Adjusted Performance

0 of 100

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

Danone SA and Glanbia PLC Volatility Contrast

   Predicted Return Density   
JavaScript chart by amCharts 3.21.15-1.87-1.42-0.97-0.52-0.080.280.731.181.632.08 0.050.100.150.200.250.30
JavaScript chart by amCharts 3.21.15GPDNF GLAPY
       Returns  

Pair Trading with Danone SA and Glanbia PLC

The main advantage of trading using opposite Danone SA and Glanbia PLC positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Danone SA position performs unexpectedly, Glanbia PLC 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 Glanbia PLC will offset losses from the drop in Glanbia PLC's long position.
The idea behind Danone SA and Glanbia PLC ADR 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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.

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