Correlation Between China Mengniu and Mastercard
Can any of the company-specific risk be diversified away by investing in both China Mengniu and Mastercard 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 Mastercard 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 Mastercard, you can compare the effects of market volatilities on China Mengniu and Mastercard 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 Mastercard. Check out your portfolio center. Please also check ongoing floating volatility patterns of China Mengniu and Mastercard.
Diversification Opportunities for China Mengniu and Mastercard
0.47 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between China and Mastercard is 0.47. Overlapping area represents the amount of risk that can be diversified away by holding China Mengniu Dairy and Mastercard in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Mastercard 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 Mastercard. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Mastercard has no effect on the direction of China Mengniu i.e., China Mengniu and Mastercard go up and down completely randomly.
Pair Corralation between China Mengniu and Mastercard
Assuming the 90 days horizon China Mengniu Dairy is expected to generate 5.46 times more return on investment than Mastercard. However, China Mengniu is 5.46 times more volatile than Mastercard. It trades about 0.11 of its potential returns per unit of risk. Mastercard is currently generating about 0.17 per unit of risk. If you would invest 1,634 in China Mengniu Dairy on September 3, 2024 and sell it today you would earn a total of 510.00 from holding China Mengniu Dairy or generate 31.21% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
China Mengniu Dairy vs. Mastercard
Performance |
| Timeline |
| China Mengniu Dairy |
| Mastercard |
China Mengniu and Mastercard Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with China Mengniu and Mastercard
The main advantage of trading using opposite China Mengniu and Mastercard positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if China Mengniu position performs unexpectedly, Mastercard 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 Mastercard will offset losses from the drop in Mastercard's long position.| China Mengniu vs. Nestle SA ADR | China Mengniu vs. ConAgra Foods | China Mengniu vs. Hormel Foods | China Mengniu vs. Kraft Heinz Co |
| Mastercard vs. American Express | Mastercard vs. Capital One Financial | Mastercard vs. Upstart Holdings | Mastercard vs. Ally Financial |
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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.
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