Correlation Between Danone SA and Boosh Plant

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

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

Diversification Opportunities for Danone SA and Boosh Plant

-0.6

Correlation Coefficient

Danone SA  Boosh Plant

Excellent diversification

The 3 months correlation between Danone and Boosh is -0.6. Overlapping area represents the amount of risk that can be diversified away by holding Danone SA and Boosh Plant Based Brands in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Boosh Plant Based 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 Boosh Plant. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Boosh Plant Based has no effect on the direction of Danone SA i.e., Danone SA and Boosh Plant go up and down completely randomly.

Pair Corralation between Danone SA and Boosh Plant

Assuming the 90 days horizon Danone SA is expected to generate 101.89 times less return on investment than Boosh Plant. But when comparing it to its historical volatility, Danone SA is 32.53 times less risky than Boosh Plant. It trades about 0.06 of its potential returns per unit of risk. Boosh Plant Based Brands is currently generating about 0.18 of returns per unit of risk over similar time horizon. If you would invest  0.31  in Boosh Plant Based Brands on September 30, 2024 and sell it today you would earn a total of  0.69  from holding Boosh Plant Based Brands or generate 222.58% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	98.44%
Values	Daily Returns

Danone SA  vs.  Boosh Plant Based Brands

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 recent stock price disturbance, may contribute to mid-run losses for the stockholders.

Boosh Plant Based

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Boosh Plant Based Brands are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. Despite nearly unfluctuating forward indicators, Boosh Plant reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Danone SA and Boosh Plant

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

The idea behind Danone SA and Boosh Plant Based Brands 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 Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.