Correlation Between China Mengniu and Mondelez International

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

Diversification Opportunities for China Mengniu and Mondelez International

0.34

Correlation Coefficient

China Mengniu  Mondelez International

Weak diversification

The 3 months correlation between China and Mondelez is 0.34. Overlapping area represents the amount of risk that can be diversified away by holding China Mengniu Dairy and Mondelez International in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Mondelez International 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 Mondelez International. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Mondelez International has no effect on the direction of China Mengniu i.e., China Mengniu and Mondelez International go up and down completely randomly.

Pair Corralation between China Mengniu and Mondelez International

Assuming the 90 days horizon China Mengniu Dairy is expected to under-perform the Mondelez International. In addition to that, China Mengniu is 1.78 times more volatile than Mondelez International. It trades about -0.3 of its total potential returns per unit of risk. Mondelez International is currently generating about -0.14 per unit of volatility. If you would invest  5,938  in Mondelez International on October 27, 2024 and sell it today you would lose (242.00) from holding Mondelez International or give up 4.08% of portfolio value over 90 days.

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

China Mengniu Dairy  vs.  Mondelez International

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.

Mondelez International

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Mondelez International 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 essential indicators remain fairly strong which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with China Mengniu and Mondelez International

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

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