Correlation Between China Mengniu and Agricultural Bank
Can any of the company-specific risk be diversified away by investing in both China Mengniu and Agricultural Bank 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 Agricultural Bank 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 Agricultural Bank of, you can compare the effects of market volatilities on China Mengniu and Agricultural Bank 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 Agricultural Bank. Check out your portfolio center. Please also check ongoing floating volatility patterns of China Mengniu and Agricultural Bank.
Diversification Opportunities for China Mengniu and Agricultural Bank
0.66 | Correlation Coefficient |
Poor diversification
The 3 months correlation between China and Agricultural is 0.66. Overlapping area represents the amount of risk that can be diversified away by holding China Mengniu Dairy and Agricultural Bank of in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Agricultural Bank 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 Agricultural Bank. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Agricultural Bank has no effect on the direction of China Mengniu i.e., China Mengniu and Agricultural Bank go up and down completely randomly.
Pair Corralation between China Mengniu and Agricultural Bank
Assuming the 90 days horizon China Mengniu Dairy is expected to generate 1.87 times more return on investment than Agricultural Bank. However, China Mengniu is 1.87 times more volatile than Agricultural Bank of. It trades about 0.04 of its potential returns per unit of risk. Agricultural Bank of is currently generating about 0.04 per unit of risk. If you would invest 2,164 in China Mengniu Dairy on August 31, 2024 and sell it today you would earn a total of 45.00 from holding China Mengniu Dairy or generate 2.08% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
China Mengniu Dairy vs. Agricultural Bank of
Performance |
| Timeline |
| China Mengniu Dairy |
| Agricultural Bank |
China Mengniu and Agricultural Bank Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with China Mengniu and Agricultural Bank
The main advantage of trading using opposite China Mengniu and Agricultural Bank positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if China Mengniu position performs unexpectedly, Agricultural Bank 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 Agricultural Bank will offset losses from the drop in Agricultural Bank's long position.| China Mengniu vs. The A2 Milk | China Mengniu vs. Altavoz Entertainment | China Mengniu vs. Artisan Consumer Goods | China Mengniu vs. General Mills |
| Agricultural Bank vs. Bank of America | Agricultural Bank vs. Bank of America | Agricultural Bank vs. Bank of America | Agricultural Bank vs. China Construction Bank |
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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.
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