Correlation Between China Mengniu and 784730AB9

Can any of the company-specific risk be diversified away by investing in both China Mengniu and 784730AB9 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 784730AB9 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 US784730AB94, you can compare the effects of market volatilities on China Mengniu and 784730AB9 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 784730AB9. Check out your portfolio center. Please also check ongoing floating volatility patterns of China Mengniu and 784730AB9.

Diversification Opportunities for China Mengniu and 784730AB9

-0.02

Correlation Coefficient

China Mengniu  784730AB9

Good diversification

The 3 months correlation between China and 784730AB9 is -0.02. Overlapping area represents the amount of risk that can be diversified away by holding China Mengniu Dairy and US784730AB94 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on US784730AB94 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 784730AB9. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of US784730AB94 has no effect on the direction of China Mengniu i.e., China Mengniu and 784730AB9 go up and down completely randomly.

Pair Corralation between China Mengniu and 784730AB9

Assuming the 90 days horizon China Mengniu Dairy is expected to generate 1.5 times more return on investment than 784730AB9. However, China Mengniu is 1.5 times more volatile than US784730AB94. It trades about 0.1 of its potential returns per unit of risk. US784730AB94 is currently generating about 0.05 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 Against
Strength	Insignificant
Accuracy	35.94%
Values	Daily Returns

China Mengniu Dairy  vs.  US784730AB94

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.

US784730AB94

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in US784730AB94 are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite somewhat unfluctuating basic indicators, 784730AB9 may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with China Mengniu and 784730AB9

The main advantage of trading using opposite China Mengniu and 784730AB9 positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if China Mengniu position performs unexpectedly, 784730AB9 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 784730AB9 will offset losses from the drop in 784730AB9's long position.

The idea behind China Mengniu Dairy and US784730AB94 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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.