Correlation Between China Mengniu and Natera

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

Diversification Opportunities for China Mengniu and Natera

0.05

Correlation Coefficient

China Mengniu  Natera

Significant diversification

The 3 months correlation between China and Natera is 0.05. Overlapping area represents the amount of risk that can be diversified away by holding China Mengniu Dairy and Natera Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Natera Inc 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 Natera. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Natera Inc has no effect on the direction of China Mengniu i.e., China Mengniu and Natera go up and down completely randomly.

Pair Corralation between China Mengniu and Natera

Assuming the 90 days horizon China Mengniu Dairy is expected to generate 1.54 times more return on investment than Natera. However, China Mengniu is 1.54 times more volatile than Natera Inc. It trades about 0.1 of its potential returns per unit of risk. Natera Inc is currently generating about 0.14 per unit of risk. If you would invest  1,760  in China Mengniu Dairy on September 22, 2024 and sell it today you would earn a total of  522.00  from holding China Mengniu Dairy or generate 29.66% return on investment over 90 days.

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

China Mengniu Dairy  vs.  Natera Inc

China Mengniu Dairy

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in China Mengniu Dairy are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of fairly unsteady fundamental indicators, China Mengniu showed solid returns over the last few months and may actually be approaching a breakup point.

Natera Inc

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Natera Inc are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite somewhat uncertain basic indicators, Natera sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with China Mengniu and Natera

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

The idea behind China Mengniu Dairy and Natera Inc 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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.