Correlation Between Danone SA and China Mengniu
Can any of the company-specific risk be diversified away by investing in both Danone SA 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 Danone SA and China Mengniu into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Danone SA and China Mengniu Dairy, you can compare the effects of market volatilities on Danone SA 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 Danone SA with a short position of China Mengniu. Check out your portfolio center. Please also check ongoing floating volatility patterns of Danone SA and China Mengniu.
Diversification Opportunities for Danone SA and China Mengniu
-0.17 | Correlation Coefficient |
Good diversification
The 3 months correlation between Danone and China is -0.17. Overlapping area represents the amount of risk that can be diversified away by holding Danone SA 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 Danone SA 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 Danone SA 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 Danone SA i.e., Danone SA and China Mengniu go up and down completely randomly.
Pair Corralation between Danone SA and China Mengniu
Assuming the 90 days horizon Danone SA is expected to under-perform the China Mengniu. But the otc stock apears to be less risky and, when comparing its historical volatility, Danone SA is 3.95 times less risky than China Mengniu. The otc stock trades about -0.27 of its potential returns per unit of risk. The China Mengniu Dairy is currently generating about 0.15 of returns per unit of risk over similar time horizon. If you would invest 2,119 in China Mengniu Dairy on September 15, 2024 and sell it today you would earn a total of 193.00 from holding China Mengniu Dairy or generate 9.11% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Danone SA vs. China Mengniu Dairy
Performance |
| Timeline |
| Danone SA |
| China Mengniu Dairy |
Danone SA and China Mengniu Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Danone SA and China Mengniu
The main advantage of trading using opposite Danone SA and China Mengniu positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Danone SA 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.| Danone SA vs. Lifevantage | Danone SA vs. Simply Good Foods | Danone SA vs. Bellring Brands LLC | Danone SA vs. Bridgford Foods |
| China Mengniu vs. Nestle SA ADR | China Mengniu vs. ConAgra Foods | China Mengniu vs. Hormel Foods | China Mengniu vs. Kraft Heinz Co |
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 Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.
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