Correlation Between Danone SA and Edison International

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Can any of the company-specific risk be diversified away by investing in both Danone SA and Edison International 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 Edison International into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Danone SA and Edison International, you can compare the effects of market volatilities on Danone SA and Edison International 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 Edison International. Check out your portfolio center. Please also check ongoing floating volatility patterns of Danone SA and Edison International.

Diversification Opportunities for Danone SA and Edison International

0.63
  Correlation Coefficient

Poor diversification

The 3 months correlation between Danone and Edison is 0.63. Overlapping area represents the amount of risk that can be diversified away by holding Danone SA and Edison International in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Edison International 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 Edison International. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Edison International has no effect on the direction of Danone SA i.e., Danone SA and Edison International go up and down completely randomly.

Pair Corralation between Danone SA and Edison International

Assuming the 90 days trading horizon Danone SA is expected to generate 0.74 times more return on investment than Edison International. However, Danone SA is 1.35 times less risky than Edison International. It trades about -0.03 of its potential returns per unit of risk. Edison International is currently generating about -0.04 per unit of risk. If you would invest  7,488  in Danone SA on May 5, 2025 and sell it today you would lose (218.00) from holding Danone SA or give up 2.91% of portfolio value over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthSignificant
Accuracy100.0%
ValuesDaily Returns

Danone SA  vs.  Edison International

 Performance 
       Timeline  
Danone SA 

Risk-Adjusted Performance

Very Weak

 
Weak
 
Strong
Over the last 90 days Danone SA has generated negative risk-adjusted returns adding no value to investors with long positions. 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.
Edison International 

Risk-Adjusted Performance

Very Weak

 
Weak
 
Strong
Over the last 90 days Edison International has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Edison International is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Danone SA and Edison International Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Danone SA and Edison International

The main advantage of trading using opposite Danone SA and Edison International positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Danone SA position performs unexpectedly, Edison International 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 Edison International will offset losses from the drop in Edison International's long position.
The idea behind Danone SA and Edison International 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 Stock Tickers module to use high-impact, comprehensive, and customizable stock tickers that can be easily integrated to any websites.

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