Correlation Between China Mengniu and Palantir Technologies

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

Diversification Opportunities for China Mengniu and Palantir Technologies

-0.34

Correlation Coefficient

China Mengniu  Palantir Technologies

Very good diversification

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

Pair Corralation between China Mengniu and Palantir Technologies

Assuming the 90 days horizon China Mengniu is expected to generate 3.46 times less return on investment than Palantir Technologies. But when comparing it to its historical volatility, China Mengniu Dairy is 1.64 times less risky than Palantir Technologies. It trades about 0.05 of its potential returns per unit of risk. Palantir Technologies Class is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest  6,708  in Palantir Technologies Class on November 29, 2024 and sell it today you would earn a total of  1,769  from holding Palantir Technologies Class or generate 26.37% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.33%
Values	Daily Returns

China Mengniu Dairy  vs.  Palantir Technologies Class

China Mengniu Dairy

Risk-Adjusted Performance

Insignificant

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 fairly weak fundamental indicators, China Mengniu may actually be approaching a critical reversion point that can send shares even higher in March 2025.

Palantir Technologies

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Palantir Technologies Class are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Even with relatively abnormal basic indicators, Palantir Technologies reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with China Mengniu and Palantir Technologies

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

The idea behind China Mengniu Dairy and Palantir Technologies Class 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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.