Correlation Between Grupo Bimbo and China Mengniu

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

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

Diversification Opportunities for Grupo Bimbo and China Mengniu

-0.33

Correlation Coefficient

Grupo Bimbo  China Mengniu

Very good diversification

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

Pair Corralation between Grupo Bimbo and China Mengniu

Assuming the 90 days horizon Grupo Bimbo SAB is expected to generate 0.97 times more return on investment than China Mengniu. However, Grupo Bimbo SAB is 1.03 times less risky than China Mengniu. It trades about -0.02 of its potential returns per unit of risk. China Mengniu Dairy is currently generating about -0.06 per unit of risk. If you would invest  1,228  in Grupo Bimbo SAB on September 2, 2024 and sell it today you would lose (32.00) from holding Grupo Bimbo SAB or give up 2.61% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	95.45%
Values	Daily Returns

Grupo Bimbo SAB  vs.  China Mengniu Dairy

Grupo Bimbo SAB

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Grupo Bimbo SAB has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest weak performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

China Mengniu Dairy

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in China Mengniu Dairy are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak fundamental indicators, China Mengniu showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Grupo Bimbo and China Mengniu

The main advantage of trading using opposite Grupo Bimbo and China Mengniu positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Grupo Bimbo 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 Grupo Bimbo SAB 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 Portfolio File Import module to quickly import all of your third-party portfolios from your local drive in csv format.