Correlation Between China Mengniu and Hormel Foods
Can any of the company-specific risk be diversified away by investing in both China Mengniu and Hormel Foods 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 Hormel Foods 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 Hormel Foods, you can compare the effects of market volatilities on China Mengniu and Hormel Foods 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 Hormel Foods. Check out your portfolio center. Please also check ongoing floating volatility patterns of China Mengniu and Hormel Foods.
Diversification Opportunities for China Mengniu and Hormel Foods
-0.07 | Correlation Coefficient |
Good diversification
The 3 months correlation between China and Hormel is -0.07. Overlapping area represents the amount of risk that can be diversified away by holding China Mengniu Dairy and Hormel Foods in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hormel Foods 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 Hormel Foods. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hormel Foods has no effect on the direction of China Mengniu i.e., China Mengniu and Hormel Foods go up and down completely randomly.
Pair Corralation between China Mengniu and Hormel Foods
Assuming the 90 days horizon China Mengniu Dairy is expected to under-perform the Hormel Foods. In addition to that, China Mengniu is 3.12 times more volatile than Hormel Foods. It trades about -0.37 of its total potential returns per unit of risk. Hormel Foods is currently generating about 0.03 per unit of volatility. If you would invest 3,420 in Hormel Foods on January 19, 2024 and sell it today you would earn a total of 18.00 from holding Hormel Foods or generate 0.53% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 95.65% |
| Values | Daily Returns |
China Mengniu Dairy vs. Hormel Foods
Performance |
| Timeline |
| China Mengniu Dairy |
| Hormel Foods |
China Mengniu and Hormel Foods Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with China Mengniu and Hormel Foods
The main advantage of trading using opposite China Mengniu and Hormel Foods positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if China Mengniu position performs unexpectedly, Hormel Foods 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 Hormel Foods will offset losses from the drop in Hormel Foods' long position.| China Mengniu vs. Kellanova | China Mengniu vs. Lancaster Colony | China Mengniu vs. The A2 Milk | China Mengniu vs. Altavoz Entertainment |
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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 Stocks Directory module to find actively traded stocks across global markets.
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