Correlation Between JM Smucker and China Mengniu
Can any of the company-specific risk be diversified away by investing in both JM Smucker 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 JM Smucker and China Mengniu into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between JM Smucker and China Mengniu Dairy, you can compare the effects of market volatilities on JM Smucker 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 JM Smucker with a short position of China Mengniu. Check out your portfolio center. Please also check ongoing floating volatility patterns of JM Smucker and China Mengniu.
Diversification Opportunities for JM Smucker and China Mengniu
0.35 | Correlation Coefficient |
Weak diversification
The 3 months correlation between SJM and China is 0.35. Overlapping area represents the amount of risk that can be diversified away by holding JM Smucker 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 JM Smucker 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 JM Smucker 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 JM Smucker i.e., JM Smucker and China Mengniu go up and down completely randomly.
Pair Corralation between JM Smucker and China Mengniu
Considering the 90-day investment horizon JM Smucker is expected to under-perform the China Mengniu. But the stock apears to be less risky and, when comparing its historical volatility, JM Smucker is 2.1 times less risky than China Mengniu. The stock trades about -0.09 of its potential returns per unit of risk. The China Mengniu Dairy is currently generating about -0.04 of returns per unit of risk over similar time horizon. If you would invest 2,192 in China Mengniu Dairy on January 24, 2024 and sell it today you would lose (202.00) from holding China Mengniu Dairy or give up 9.22% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
JM Smucker vs. China Mengniu Dairy
Performance |
| Timeline |
| JM Smucker |
| China Mengniu Dairy |
JM Smucker and China Mengniu Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with JM Smucker and China Mengniu
The main advantage of trading using opposite JM Smucker and China Mengniu positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if JM Smucker 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.| JM Smucker vs. Bunge Limited | JM Smucker vs. Archer Daniels Midland | JM Smucker vs. Fresh Del Monte | JM Smucker vs. Limoneira Co |
| China Mengniu vs. Kellanova | China Mengniu vs. Lancaster Colony | China Mengniu vs. The A2 Milk | China Mengniu vs. Artisan Consumer Goods |
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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.
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