Correlation Between PGE Corp and China Mengniu

Can any of the company-specific risk be diversified away by investing in both PGE Corp 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 PGE Corp and China Mengniu into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between PGE Corp and China Mengniu Dairy, you can compare the effects of market volatilities on PGE Corp 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 PGE Corp with a short position of China Mengniu. Check out your portfolio center. Please also check ongoing floating volatility patterns of PGE Corp and China Mengniu.

Diversification Opportunities for PGE Corp and China Mengniu

-0.62

Correlation Coefficient

PGE Corp  China Mengniu

Excellent diversification

The 3 months correlation between PGE and China is -0.62. Overlapping area represents the amount of risk that can be diversified away by holding PGE Corp 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 PGE Corp 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 PGE Corp 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 PGE Corp i.e., PGE Corp and China Mengniu go up and down completely randomly.

Pair Corralation between PGE Corp and China Mengniu

If you would invest  250.00  in China Mengniu Dairy on January 29, 2024 and sell it today you would earn a total of  0.00  from holding China Mengniu Dairy or generate 0.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	4.76%
Values	Daily Returns

PGE Corp  vs.  China Mengniu Dairy

PGE Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days PGE Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable technical and fundamental indicators, PGE Corp is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

China Mengniu Dairy

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days China Mengniu Dairy has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable fundamental indicators, China Mengniu is not utilizing all of its potentials. The recent stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with PGE Corp and China Mengniu

The main advantage of trading using opposite PGE Corp and China Mengniu positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if PGE Corp 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 PGE Corp 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.

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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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.