Correlation Between A2 Milk and Aryzta AG

Can any of the company-specific risk be diversified away by investing in both A2 Milk and Aryzta AG 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 A2 Milk and Aryzta AG into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between The a2 Milk and Aryzta AG PK, you can compare the effects of market volatilities on A2 Milk and Aryzta AG 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 A2 Milk with a short position of Aryzta AG. Check out your portfolio center. Please also check ongoing floating volatility patterns of A2 Milk and Aryzta AG.

Diversification Opportunities for A2 Milk and Aryzta AG

0.7

Correlation Coefficient

A2 Milk  Aryzta AG

Poor diversification

The 3 months correlation between ACOPF and Aryzta is 0.7. Overlapping area represents the amount of risk that can be diversified away by holding The a2 Milk and Aryzta AG PK in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Aryzta AG PK and A2 Milk 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 The a2 Milk are associated (or correlated) with Aryzta AG. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Aryzta AG PK has no effect on the direction of A2 Milk i.e., A2 Milk and Aryzta AG go up and down completely randomly.

Pair Corralation between A2 Milk and Aryzta AG

Assuming the 90 days horizon The a2 Milk is expected to generate 1.46 times more return on investment than Aryzta AG. However, A2 Milk is 1.46 times more volatile than Aryzta AG PK. It trades about 0.08 of its potential returns per unit of risk. Aryzta AG PK is currently generating about 0.11 per unit of risk. If you would invest  399.00  in The a2 Milk on December 29, 2024 and sell it today you would earn a total of  83.00  from holding The a2 Milk or generate 20.8% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	100.0%
Values	Daily Returns

The a2 Milk  vs.  Aryzta AG PK

a2 Milk

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in The a2 Milk are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain basic indicators, A2 Milk reported solid returns over the last few months and may actually be approaching a breakup point.

Aryzta AG PK

Risk-Adjusted Performance

OK

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

Pair Trading with A2 Milk and Aryzta AG

The main advantage of trading using opposite A2 Milk and Aryzta AG positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if A2 Milk position performs unexpectedly, Aryzta AG 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 Aryzta AG will offset losses from the drop in Aryzta AG's long position.

The idea behind The a2 Milk and Aryzta AG PK 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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.