Correlation Between Kerry Group and China Mengniu

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

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

Diversification Opportunities for Kerry Group and China Mengniu

0.06

Correlation Coefficient

Kerry Group  China Mengniu

Significant diversification

The 3 months correlation between Kerry and China is 0.06. Overlapping area represents the amount of risk that can be diversified away by holding Kerry Group plc 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 Kerry Group 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 Kerry Group plc 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 Kerry Group i.e., Kerry Group and China Mengniu go up and down completely randomly.

Pair Corralation between Kerry Group and China Mengniu

Assuming the 90 days horizon Kerry Group plc is expected to generate 0.43 times more return on investment than China Mengniu. However, Kerry Group plc is 2.32 times less risky than China Mengniu. It trades about 0.22 of its potential returns per unit of risk. China Mengniu Dairy is currently generating about -0.14 per unit of risk. If you would invest  8,948  in Kerry Group plc on October 12, 2024 and sell it today you would earn a total of  479.00  from holding Kerry Group plc or generate 5.35% return on investment over 90 days.

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

Kerry Group plc  vs.  China Mengniu Dairy

Kerry Group plc

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Kerry Group plc has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

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 current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Kerry Group and China Mengniu

The main advantage of trading using opposite Kerry Group and China Mengniu positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Kerry Group 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 Kerry Group plc 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.

Check out your portfolio center.

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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.