Correlation Between New Hope and Panda Dairy

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Can any of the company-specific risk be diversified away by investing in both New Hope and Panda Dairy 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 New Hope and Panda Dairy into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between New Hope Dairy and Panda Dairy Corp, you can compare the effects of market volatilities on New Hope and Panda Dairy 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 New Hope with a short position of Panda Dairy. Check out your portfolio center. Please also check ongoing floating volatility patterns of New Hope and Panda Dairy.

Diversification Opportunities for New Hope and Panda Dairy

0.67
  Correlation Coefficient

Poor diversification

The 3 months correlation between New and Panda is 0.67. Overlapping area represents the amount of risk that can be diversified away by holding New Hope Dairy and Panda Dairy Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Panda Dairy Corp and New Hope 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 New Hope Dairy are associated (or correlated) with Panda Dairy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Panda Dairy Corp has no effect on the direction of New Hope i.e., New Hope and Panda Dairy go up and down completely randomly.

Pair Corralation between New Hope and Panda Dairy

Assuming the 90 days trading horizon New Hope Dairy is expected to generate 0.67 times more return on investment than Panda Dairy. However, New Hope Dairy is 1.49 times less risky than Panda Dairy. It trades about 0.17 of its potential returns per unit of risk. Panda Dairy Corp is currently generating about -0.11 per unit of risk. If you would invest  1,421  in New Hope Dairy on October 22, 2024 and sell it today you would earn a total of  109.00  from holding New Hope Dairy or generate 7.67% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthSignificant
Accuracy100.0%
ValuesDaily Returns

New Hope Dairy  vs.  Panda Dairy Corp

 Performance 
       Timeline  
New Hope Dairy 

Risk-Adjusted Performance

12 of 100

 
Weak
 
Strong
Good
Compared to the overall equity markets, risk-adjusted returns on investments in New Hope Dairy are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, New Hope sustained solid returns over the last few months and may actually be approaching a breakup point.
Panda Dairy Corp 

Risk-Adjusted Performance

4 of 100

 
Weak
 
Strong
Modest
Compared to the overall equity markets, risk-adjusted returns on investments in Panda Dairy Corp are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Panda Dairy sustained solid returns over the last few months and may actually be approaching a breakup point.

New Hope and Panda Dairy Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with New Hope and Panda Dairy

The main advantage of trading using opposite New Hope and Panda Dairy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if New Hope position performs unexpectedly, Panda Dairy 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 Panda Dairy will offset losses from the drop in Panda Dairy's long position.
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The idea behind New Hope Dairy and Panda Dairy Corp 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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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 Cryptocurrency Center module to build and monitor diversified portfolio of extremely risky digital assets and cryptocurrency.

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