Correlation Between China Mengniu and JM Smucker

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Can any of the company-specific risk be diversified away by investing in both China Mengniu and JM Smucker 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 JM Smucker 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 JM Smucker, you can compare the effects of market volatilities on China Mengniu and JM Smucker 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 JM Smucker. Check out your portfolio center. Please also check ongoing floating volatility patterns of China Mengniu and JM Smucker.

Diversification Opportunities for China Mengniu and JM Smucker

-0.47
  Correlation Coefficient

Very good diversification

The 3 months correlation between China and SJM is -0.47. Overlapping area represents the amount of risk that can be diversified away by holding China Mengniu Dairy and JM Smucker in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on JM Smucker 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 JM Smucker. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of JM Smucker has no effect on the direction of China Mengniu i.e., China Mengniu and JM Smucker go up and down completely randomly.

Pair Corralation between China Mengniu and JM Smucker

Assuming the 90 days horizon China Mengniu Dairy is expected to under-perform the JM Smucker. In addition to that, China Mengniu is 2.64 times more volatile than JM Smucker. It trades about -0.19 of its total potential returns per unit of risk. JM Smucker is currently generating about 0.13 per unit of volatility. If you would invest  12,183  in JM Smucker on December 30, 2023 and sell it today you would earn a total of  404.00  from holding JM Smucker or generate 3.32% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthVery Weak
Accuracy100.0%
ValuesDaily Returns

China Mengniu Dairy  vs.  JM Smucker

 Performance 
       Timeline  
China Mengniu Dairy 

Risk-Adjusted Performance

0 of 100

 
Low
 
High
Very Weak
Over the last 90 days China Mengniu Dairy has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unsteady performance in the last few months, the Stock's fundamental indicators remain fairly strong which may send shares a bit higher in April 2024. The current disturbance may also be a sign of long term up-swing for the company investors.
JM Smucker 

Risk-Adjusted Performance

0 of 100

 
Low
 
High
Very Weak
Over the last 90 days JM Smucker has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy forward-looking indicators, JM Smucker is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

China Mengniu and JM Smucker Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with China Mengniu and JM Smucker

The main advantage of trading using opposite China Mengniu and JM Smucker positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if China Mengniu position performs unexpectedly, JM Smucker 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 JM Smucker will offset losses from the drop in JM Smucker's long position.
The idea behind China Mengniu Dairy and JM Smucker pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.
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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.

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