Correlation Between Grupo Bimbo and Danone SA

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

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

Diversification Opportunities for Grupo Bimbo and Danone SA

0.75

Correlation Coefficient

Grupo Bimbo  Danone SA

Poor diversification

The 3 months correlation between Grupo and Danone is 0.75. Overlapping area represents the amount of risk that can be diversified away by holding Grupo Bimbo SAB and Danone SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Danone SA and Grupo Bimbo 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 Grupo Bimbo SAB 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 Grupo Bimbo i.e., Grupo Bimbo and Danone SA go up and down completely randomly.

Pair Corralation between Grupo Bimbo and Danone SA

Assuming the 90 days horizon Grupo Bimbo SAB is expected to under-perform the Danone SA. In addition to that, Grupo Bimbo is 2.31 times more volatile than Danone SA. It trades about -0.16 of its total potential returns per unit of risk. Danone SA is currently generating about -0.1 per unit of volatility. If you would invest  7,125  in Danone SA on September 21, 2024 and sell it today you would lose (510.00) from holding Danone SA or give up 7.16% of portfolio value over 90 days.

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

Grupo Bimbo SAB  vs.  Danone SA

Grupo Bimbo SAB

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Grupo Bimbo SAB has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of uncertain performance in the last few months, the Stock's basic indicators remain fairly strong which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

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 latest uncertain performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Pair Trading with Grupo Bimbo and Danone SA

The main advantage of trading using opposite Grupo Bimbo and Danone SA positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Grupo Bimbo 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 Grupo Bimbo SAB 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 Portfolio Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.