Correlation Between China Mengniu and Sitio Royalties
Can any of the company-specific risk be diversified away by investing in both China Mengniu and Sitio Royalties 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 Sitio Royalties 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 Sitio Royalties Corp, you can compare the effects of market volatilities on China Mengniu and Sitio Royalties 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 Sitio Royalties. Check out your portfolio center. Please also check ongoing floating volatility patterns of China Mengniu and Sitio Royalties.
Diversification Opportunities for China Mengniu and Sitio Royalties
0.44 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between China and Sitio is 0.44. Overlapping area represents the amount of risk that can be diversified away by holding China Mengniu Dairy and Sitio Royalties Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sitio Royalties Corp 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 Sitio Royalties. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sitio Royalties Corp has no effect on the direction of China Mengniu i.e., China Mengniu and Sitio Royalties go up and down completely randomly.
Pair Corralation between China Mengniu and Sitio Royalties
Assuming the 90 days horizon China Mengniu Dairy is expected to generate 2.59 times more return on investment than Sitio Royalties. However, China Mengniu is 2.59 times more volatile than Sitio Royalties Corp. It trades about 0.11 of its potential returns per unit of risk. Sitio Royalties Corp is currently generating about 0.11 per unit of risk. If you would invest 1,634 in China Mengniu Dairy on September 2, 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. Sitio Royalties Corp
Performance |
| Timeline |
| China Mengniu Dairy |
| Sitio Royalties Corp |
China Mengniu and Sitio Royalties Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with China Mengniu and Sitio Royalties
The main advantage of trading using opposite China Mengniu and Sitio Royalties positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if China Mengniu position performs unexpectedly, Sitio Royalties 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 Sitio Royalties will offset losses from the drop in Sitio Royalties' long position.| China Mengniu vs. The A2 Milk | China Mengniu vs. Artisan Consumer Goods | China Mengniu vs. General Mills |
| Sitio Royalties vs. Black Stone Minerals | Sitio Royalties vs. Dorchester Minerals LP | Sitio Royalties vs. MV Oil Trust | Sitio Royalties vs. VOC Energy Trust |
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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..
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