Correlation Between Danone SA and Pilgrims Pride

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

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

Diversification Opportunities for Danone SA and Pilgrims Pride

-0.46

Correlation Coefficient

Danone SA  Pilgrims Pride

Very good diversification

The 3 months correlation between Danone and Pilgrims is -0.46. Overlapping area represents the amount of risk that can be diversified away by holding Danone SA and Pilgrims Pride Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pilgrims Pride Corp 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 Pilgrims Pride. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Pilgrims Pride Corp has no effect on the direction of Danone SA i.e., Danone SA and Pilgrims Pride go up and down completely randomly.

Pair Corralation between Danone SA and Pilgrims Pride

Assuming the 90 days horizon Danone SA is expected to under-perform the Pilgrims Pride. But the otc stock apears to be less risky and, when comparing its historical volatility, Danone SA is 2.35 times less risky than Pilgrims Pride. The otc stock trades about -0.05 of its potential returns per unit of risk. The Pilgrims Pride Corp is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest  4,325  in Pilgrims Pride Corp on September 19, 2024 and sell it today you would earn a total of  491.00  from holding Pilgrims Pride Corp or generate 11.35% return on investment over 90 days.

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

Danone SA  vs.  Pilgrims Pride Corp

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

Pilgrims Pride Corp

Risk-Adjusted Performance

6 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Pilgrims Pride Corp are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady basic indicators, Pilgrims Pride may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Danone SA and Pilgrims Pride

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

The idea behind Danone SA and Pilgrims Pride Corp 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.

Check out your portfolio center.

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 Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.