Correlation Between Campbell Soup and China Mengniu

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Can any of the company-specific risk be diversified away by investing in both Campbell Soup 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 Campbell Soup and China Mengniu into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Campbell Soup and China Mengniu Dairy, you can compare the effects of market volatilities on Campbell Soup 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 Campbell Soup with a short position of China Mengniu. Check out your portfolio center. Please also check ongoing floating volatility patterns of Campbell Soup and China Mengniu.

Diversification Opportunities for Campbell Soup and China Mengniu

-0.33
  Correlation Coefficient

Very good diversification

The 3 months correlation between Campbell and China is -0.33. Overlapping area represents the amount of risk that can be diversified away by holding Campbell Soup 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 Campbell Soup 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 Campbell Soup 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 Campbell Soup i.e., Campbell Soup and China Mengniu go up and down completely randomly.

Pair Corralation between Campbell Soup and China Mengniu

Considering the 90-day investment horizon Campbell Soup is expected to generate 0.35 times more return on investment than China Mengniu. However, Campbell Soup is 2.89 times less risky than China Mengniu. It trades about 0.2 of its potential returns per unit of risk. China Mengniu Dairy is currently generating about -0.24 per unit of risk. If you would invest  4,226  in Campbell Soup on December 29, 2023 and sell it today you would earn a total of  219.00  from holding Campbell Soup or generate 5.18% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthInsignificant
Accuracy100.0%
ValuesDaily Returns

Campbell Soup  vs.  China Mengniu Dairy

 Performance 
       Timeline  
Campbell Soup 

Risk-Adjusted Performance

3 of 100

 
Low
 
High
Insignificant
Compared to the overall equity markets, risk-adjusted returns on investments in Campbell Soup are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Campbell Soup is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.
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.

Campbell Soup and China Mengniu Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Campbell Soup and China Mengniu

The main advantage of trading using opposite Campbell Soup and China Mengniu positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Campbell Soup 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.
The idea behind Campbell Soup and China Mengniu Dairy 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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.

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