Correlation Between China State and Panda Dairy Corp

Can any of the company-specific risk be diversified away by investing in both China State and Panda Dairy Corp 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 China State and Panda Dairy Corp into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between China State Construction and Panda Dairy Corp, you can compare the effects of market volatilities on China State and Panda Dairy Corp 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 China State with a short position of Panda Dairy Corp. Check out your portfolio center. Please also check ongoing floating volatility patterns of China State and Panda Dairy Corp.

Diversification Opportunities for China State and Panda Dairy Corp

0.37

Correlation Coefficient

China State  Panda Dairy Corp

Weak diversification

The 3 months correlation between China and Panda is 0.37. Overlapping area represents the amount of risk that can be diversified away by holding China State Construction and Panda Dairy Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Panda Dairy Corp and China State 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 China State Construction are associated (or correlated) with Panda Dairy Corp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Panda Dairy Corp has no effect on the direction of China State i.e., China State and Panda Dairy Corp go up and down completely randomly.

Pair Corralation between China State and Panda Dairy Corp

Assuming the 90 days trading horizon China State Construction is expected to under-perform the Panda Dairy Corp. But the stock apears to be less risky and, when comparing its historical volatility, China State Construction is 5.15 times less risky than Panda Dairy Corp. The stock trades about -0.17 of its potential returns per unit of risk. The Panda Dairy Corp is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest  2,379  in Panda Dairy Corp on December 3, 2024 and sell it today you would earn a total of  475.00  from holding Panda Dairy Corp or generate 19.97% return on investment over 90 days.

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

China State Construction  vs.  Panda Dairy Corp

China State Construction

Risk-Adjusted Performance

Very Weak

Over the last 90 days China State Construction has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Panda Dairy Corp

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Panda Dairy Corp are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Panda Dairy Corp sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with China State and Panda Dairy Corp

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

The idea behind China State Construction and Panda Dairy 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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.