Correlation Between China Mengniu and Airports

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

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

Diversification Opportunities for China Mengniu and Airports

-0.54

Correlation Coefficient

China Mengniu  Airports

Excellent diversification

The 3 months correlation between China and Airports is -0.54. Overlapping area represents the amount of risk that can be diversified away by holding China Mengniu Dairy and Airports of Thailand in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Airports of Thailand and China Mengniu 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 Mengniu Dairy are associated (or correlated) with Airports. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Airports of Thailand has no effect on the direction of China Mengniu i.e., China Mengniu and Airports go up and down completely randomly.

Pair Corralation between China Mengniu and Airports

Assuming the 90 days horizon China Mengniu Dairy is expected to generate 0.53 times more return on investment than Airports. However, China Mengniu Dairy is 1.88 times less risky than Airports. It trades about 0.08 of its potential returns per unit of risk. Airports of Thailand is currently generating about -0.08 per unit of risk. If you would invest  2,183  in China Mengniu Dairy on December 30, 2024 and sell it today you would earn a total of  268.00  from holding China Mengniu Dairy or generate 12.28% return on investment over 90 days.

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

China Mengniu Dairy  vs.  Airports of Thailand

China Mengniu Dairy

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in China Mengniu Dairy are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak fundamental indicators, China Mengniu showed solid returns over the last few months and may actually be approaching a breakup point.

Airports of Thailand

Risk-Adjusted Performance

Very Weak

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

Pair Trading with China Mengniu and Airports

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

The idea behind China Mengniu Dairy and Airports of Thailand 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 Global Markets Map module to get a quick overview of global market snapshot using zoomable world map. Drill down to check world indexes.