Correlation Between Life Electric and China Mengniu
Can any of the company-specific risk be diversified away by investing in both Life Electric 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 Life Electric and China Mengniu into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Life Electric Vehicles and China Mengniu Dairy, you can compare the effects of market volatilities on Life Electric 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 Life Electric with a short position of China Mengniu. Check out your portfolio center. Please also check ongoing floating volatility patterns of Life Electric and China Mengniu.
Diversification Opportunities for Life Electric and China Mengniu
-0.37 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Life and China is -0.37. Overlapping area represents the amount of risk that can be diversified away by holding Life Electric Vehicles 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 Life Electric 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 Life Electric Vehicles 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 Life Electric i.e., Life Electric and China Mengniu go up and down completely randomly.
Pair Corralation between Life Electric and China Mengniu
Given the investment horizon of 90 days Life Electric Vehicles is expected to generate 3.13 times more return on investment than China Mengniu. However, Life Electric is 3.13 times more volatile than China Mengniu Dairy. It trades about 0.02 of its potential returns per unit of risk. China Mengniu Dairy is currently generating about -0.01 per unit of risk. If you would invest 60.00 in Life Electric Vehicles on September 2, 2024 and sell it today you would lose (35.00) from holding Life Electric Vehicles or give up 58.33% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Life Electric Vehicles vs. China Mengniu Dairy
Performance |
| Timeline |
| Life Electric Vehicles |
| China Mengniu Dairy |
Life Electric and China Mengniu Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Life Electric and China Mengniu
The main advantage of trading using opposite Life Electric and China Mengniu positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Life Electric 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.| Life Electric vs. Volkswagen AG 110 | Life Electric vs. Stellantis NV | Life Electric vs. Toyota Motor | Life Electric vs. Honda Motor Co |
| China Mengniu vs. The A2 Milk | China Mengniu vs. Artisan Consumer Goods | China Mengniu vs. General Mills |
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 Transaction History module to view history of all your transactions and understand their impact on performance.
Other Complementary Tools
| Premium Stories Follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope | |
| Competition Analyzer Analyze and compare many basic indicators for a group of related or unrelated entities | |
| Idea Analyzer Analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas | |
| Bonds Directory Find actively traded corporate debentures issued by US companies | |
| Efficient Frontier Plot and analyze your portfolio and positions against risk-return landscape of the market. |