Correlation Between China Mengniu and Lery Seafood

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

Diversification Opportunities for China Mengniu and Lery Seafood

-0.61

Correlation Coefficient

China Mengniu  Lery Seafood

Excellent diversification

The 3 months correlation between China and Lery is -0.61. Overlapping area represents the amount of risk that can be diversified away by holding China Mengniu Dairy and Lery Seafood Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lery Seafood Group 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 Lery Seafood. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lery Seafood Group has no effect on the direction of China Mengniu i.e., China Mengniu and Lery Seafood go up and down completely randomly.

Pair Corralation between China Mengniu and Lery Seafood

Assuming the 90 days horizon China Mengniu is expected to generate 4.9 times less return on investment than Lery Seafood. In addition to that, China Mengniu is 1.44 times more volatile than Lery Seafood Group. It trades about 0.03 of its total potential returns per unit of risk. Lery Seafood Group is currently generating about 0.22 per unit of volatility. If you would invest  425.00  in Lery Seafood Group on September 4, 2024 and sell it today you would earn a total of  50.00  from holding Lery Seafood Group or generate 11.76% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	95.24%
Values	Daily Returns

China Mengniu Dairy  vs.  Lery Seafood Group

China Mengniu Dairy

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in China Mengniu Dairy are ranked lower than 9 (%) 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.

Lery Seafood Group

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with China Mengniu and Lery Seafood

The main advantage of trading using opposite China Mengniu and Lery Seafood positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if China Mengniu position performs unexpectedly, Lery Seafood 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 Lery Seafood will offset losses from the drop in Lery Seafood's long position.

The idea behind China Mengniu Dairy and Lery Seafood Group 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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.