Correlation Between Danone SA and Simply Good

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

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

Diversification Opportunities for Danone SA and Simply Good

-0.81

Correlation Coefficient

Danone SA  Simply Good

Pay attention - limited upside

The 3 months correlation between Danone and Simply is -0.81. Overlapping area represents the amount of risk that can be diversified away by holding Danone SA and Simply Good Foods in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Simply Good Foods 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 Simply Good. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Simply Good Foods has no effect on the direction of Danone SA i.e., Danone SA and Simply Good go up and down completely randomly.

Pair Corralation between Danone SA and Simply Good

Assuming the 90 days horizon Danone SA is expected to generate 1.27 times more return on investment than Simply Good. However, Danone SA is 1.27 times more volatile than Simply Good Foods. It trades about 0.04 of its potential returns per unit of risk. Simply Good Foods is currently generating about 0.01 per unit of risk. If you would invest  4,937  in Danone SA on September 20, 2024 and sell it today you would earn a total of  1,948  from holding Danone SA or generate 39.46% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Significant
Accuracy	91.11%
Values	Daily Returns

Danone SA  vs.  Simply Good Foods

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.

Simply Good Foods

Risk-Adjusted Performance

14 of 100

Good

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

Pair Trading with Danone SA and Simply Good

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

The idea behind Danone SA and Simply Good Foods 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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.