Correlation Between Fleury Michon and Danone SA

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

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

Diversification Opportunities for Fleury Michon and Danone SA

-0.51

Correlation Coefficient

Fleury Michon  Danone SA

Excellent diversification

The 3 months correlation between Fleury and Danone is -0.51. Overlapping area represents the amount of risk that can be diversified away by holding Fleury Michon and Danone SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Danone SA and Fleury Michon 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 Fleury Michon 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 Fleury Michon i.e., Fleury Michon and Danone SA go up and down completely randomly.

Pair Corralation between Fleury Michon and Danone SA

Assuming the 90 days trading horizon Fleury Michon is expected to generate 2.19 times more return on investment than Danone SA. However, Fleury Michon is 2.19 times more volatile than Danone SA. It trades about 0.1 of its potential returns per unit of risk. Danone SA is currently generating about 0.1 per unit of risk. If you would invest  1,837  in Fleury Michon on August 27, 2024 and sell it today you would earn a total of  663.00  from holding Fleury Michon or generate 36.09% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

Fleury Michon  vs.  Danone SA

Fleury Michon

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Fleury Michon has generated negative risk-adjusted returns adding no value to investors with long positions. Even with latest weak performance, the Stock's basic indicators remain invariable and the latest agitation on Wall Street may also be a sign of long-running gains for the enterprise retail investors.

Danone SA

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Danone SA are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Danone SA is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Fleury Michon and Danone SA

The main advantage of trading using opposite Fleury Michon and Danone SA positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Fleury Michon 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 Fleury Michon 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 Headlines Timeline module to stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity.