Correlation Between China Mengniu and Kerry Group

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

Diversification Opportunities for China Mengniu and Kerry Group

0.67

Correlation Coefficient

China Mengniu  Kerry Group

Poor diversification

The 3 months correlation between China and Kerry is 0.67. Overlapping area represents the amount of risk that can be diversified away by holding China Mengniu Dairy and Kerry Group plc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Kerry Group plc 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 Kerry Group. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Kerry Group plc has no effect on the direction of China Mengniu i.e., China Mengniu and Kerry Group go up and down completely randomly.

Pair Corralation between China Mengniu and Kerry Group

Assuming the 90 days horizon China Mengniu Dairy is expected to generate 3.22 times more return on investment than Kerry Group. However, China Mengniu is 3.22 times more volatile than Kerry Group plc. It trades about 0.07 of its potential returns per unit of risk. Kerry Group plc is currently generating about 0.18 per unit of risk. If you would invest  2,183  in China Mengniu Dairy on December 28, 2024 and sell it today you would earn a total of  210.00  from holding China Mengniu Dairy or generate 9.62% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	90.0%
Values	Daily Returns

China Mengniu Dairy  vs.  Kerry Group plc

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 may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Kerry Group plc

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Kerry Group plc are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak basic indicators, Kerry Group may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with China Mengniu and Kerry Group

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

The idea behind China Mengniu Dairy and Kerry Group plc 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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.