Correlation Between Danone SA and J J

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

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

Diversification Opportunities for Danone SA and J J

0.05

Correlation Coefficient

Danone SA  J J

Significant diversification

The 3 months correlation between Danone and JJSF is 0.05. Overlapping area represents the amount of risk that can be diversified away by holding Danone SA and J J Snack in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on J J Snack 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 J J. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of J J Snack has no effect on the direction of Danone SA i.e., Danone SA and J J go up and down completely randomly.

Pair Corralation between Danone SA and J J

Assuming the 90 days horizon Danone SA is expected to generate 0.74 times more return on investment than J J. However, Danone SA is 1.35 times less risky than J J. It trades about 0.04 of its potential returns per unit of risk. J J Snack is currently generating about 0.0 per unit of risk. If you would invest  6,232  in Danone SA on September 20, 2024 and sell it today you would earn a total of  653.00  from holding Danone SA or generate 10.48% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	90.76%
Values	Daily Returns

Danone SA  vs.  J J Snack

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.

J J Snack

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Danone SA and J J

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

The idea behind Danone SA and J J Snack 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 Portfolio Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.