Correlation Between China Mengniu and Bristol Myers

Can any of the company-specific risk be diversified away by investing in both China Mengniu and Bristol Myers 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 Bristol Myers 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 Bristol Myers Squibb, you can compare the effects of market volatilities on China Mengniu and Bristol Myers 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 Bristol Myers. Check out your portfolio center. Please also check ongoing floating volatility patterns of China Mengniu and Bristol Myers.

Diversification Opportunities for China Mengniu and Bristol Myers

-0.23

Correlation Coefficient

China Mengniu  Bristol Myers

Very good diversification

The 3 months correlation between China and Bristol is -0.23. Overlapping area represents the amount of risk that can be diversified away by holding China Mengniu Dairy and Bristol Myers Squibb in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bristol Myers Squibb 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 Bristol Myers. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Bristol Myers Squibb has no effect on the direction of China Mengniu i.e., China Mengniu and Bristol Myers go up and down completely randomly.

Pair Corralation between China Mengniu and Bristol Myers

Assuming the 90 days horizon China Mengniu Dairy is expected to under-perform the Bristol Myers. But the pink sheet apears to be less risky and, when comparing its historical volatility, China Mengniu Dairy is 1.35 times less risky than Bristol Myers. The pink sheet trades about -0.04 of its potential returns per unit of risk. The Bristol Myers Squibb is currently generating about 0.0 of returns per unit of risk over similar time horizon. If you would invest  117,420  in Bristol Myers Squibb on October 12, 2024 and sell it today you would lose (23,898) from holding Bristol Myers Squibb or give up 20.35% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	50.71%
Values	Daily Returns

China Mengniu Dairy  vs.  Bristol Myers Squibb

China Mengniu Dairy

Risk-Adjusted Performance

0 of 100

Very Weak

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

Bristol Myers Squibb

Risk-Adjusted Performance

2 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Bristol Myers Squibb are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Even with relatively fragile primary indicators, Bristol Myers may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with China Mengniu and Bristol Myers

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

The idea behind China Mengniu Dairy and Bristol Myers Squibb 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 Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.