Correlation Between KKR Co and China Mengniu

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

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

Diversification Opportunities for KKR Co and China Mengniu

-0.21

Correlation Coefficient

KKR Co  China Mengniu

Very good diversification

The 3 months correlation between KKR and China is -0.21. Overlapping area represents the amount of risk that can be diversified away by holding KKR Co LP 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 KKR Co 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 KKR Co LP 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 KKR Co i.e., KKR Co and China Mengniu go up and down completely randomly.

Pair Corralation between KKR Co and China Mengniu

Considering the 90-day investment horizon KKR Co LP is expected to under-perform the China Mengniu. But the stock apears to be less risky and, when comparing its historical volatility, KKR Co LP is 1.56 times less risky than China Mengniu. The stock trades about -0.13 of its potential returns per unit of risk. The China Mengniu Dairy is currently generating about 0.0 of returns per unit of risk over similar time horizon. If you would invest  2,256  in China Mengniu Dairy on October 1, 2024 and sell it today you would lose (26.00) from holding China Mengniu Dairy or give up 1.15% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	95.24%
Values	Daily Returns

KKR Co LP  vs.  China Mengniu Dairy

KKR Co LP

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in KKR Co LP are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Even with relatively fragile forward-looking signals, KKR Co reported solid returns over the last few months and may actually be approaching a breakup point.

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 fairly strong fundamental indicators, China Mengniu is not utilizing all of its potentials. The recent stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with KKR Co and China Mengniu

The main advantage of trading using opposite KKR Co and China Mengniu positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if KKR Co 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 KKR Co LP 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 Portfolio Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.