Correlation Between FactSet Research and China Mengniu

Can any of the company-specific risk be diversified away by investing in both FactSet Research and China Mengniu 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 FactSet Research and China Mengniu into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between FactSet Research Systems and China Mengniu Dairy, you can compare the effects of market volatilities on FactSet Research and China Mengniu 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 FactSet Research with a short position of China Mengniu. Check out your portfolio center. Please also check ongoing floating volatility patterns of FactSet Research and China Mengniu.

Diversification Opportunities for FactSet Research and China Mengniu

0.52

Correlation Coefficient

FactSet Research  China Mengniu

Very weak diversification

The 3 months correlation between FactSet and China is 0.52. Overlapping area represents the amount of risk that can be diversified away by holding FactSet Research Systems and China Mengniu Dairy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on China Mengniu Dairy and FactSet Research 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 FactSet Research Systems are associated (or correlated) with China Mengniu. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of China Mengniu Dairy has no effect on the direction of FactSet Research i.e., FactSet Research and China Mengniu go up and down completely randomly.

Pair Corralation between FactSet Research and China Mengniu

Considering the 90-day investment horizon FactSet Research Systems is expected to generate 0.33 times more return on investment than China Mengniu. However, FactSet Research Systems is 3.05 times less risky than China Mengniu. It trades about 0.3 of its potential returns per unit of risk. China Mengniu Dairy is currently generating about -0.06 per unit of risk. If you would invest  45,783  in FactSet Research Systems on September 2, 2024 and sell it today you would earn a total of  3,284  from holding FactSet Research Systems or generate 7.17% return on investment over 90 days.

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

FactSet Research Systems  vs.  China Mengniu Dairy

FactSet Research Systems

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in FactSet Research Systems are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak fundamental indicators, FactSet Research unveiled solid returns over the last few months and may actually be approaching a breakup point.

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 weak fundamental indicators, China Mengniu showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with FactSet Research and China Mengniu

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

The idea behind FactSet Research Systems and China Mengniu Dairy 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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.