Correlation Between Real Good and Danone SA

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

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

Diversification Opportunities for Real Good and Danone SA

0.8

Correlation Coefficient

Real Good  Danone SA

Very poor diversification

The 3 months correlation between Real and Danone is 0.8. Overlapping area represents the amount of risk that can be diversified away by holding Real Good Food and Danone SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Danone SA and Real Good 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 Real Good Food are associated (or correlated) with Danone SA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Danone SA has no effect on the direction of Real Good i.e., Real Good and Danone SA go up and down completely randomly.

Pair Corralation between Real Good and Danone SA

Considering the 90-day investment horizon Real Good Food is expected to under-perform the Danone SA. In addition to that, Real Good is 6.74 times more volatile than Danone SA. It trades about -0.05 of its total potential returns per unit of risk. Danone SA is currently generating about 0.04 per unit of volatility. 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	Strong
Accuracy	90.76%
Values	Daily Returns

Real Good Food  vs.  Danone SA

Real Good Food

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Real Good Food has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's technical and fundamental indicators remain nearly stable which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

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.

Pair Trading with Real Good and Danone SA

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

The idea behind Real Good Food and Danone SA 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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.