Correlation Between A2 Milk and Blue Star

Can any of the company-specific risk be diversified away by investing in both A2 Milk and Blue Star 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 Blue Star 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 Blue Star Foods, you can compare the effects of market volatilities on A2 Milk and Blue Star 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 Blue Star. Check out your portfolio center. Please also check ongoing floating volatility patterns of A2 Milk and Blue Star.

Diversification Opportunities for A2 Milk and Blue Star

0.71

Correlation Coefficient

A2 Milk  Blue Star

Poor diversification

The 3 months correlation between ACOPY and Blue is 0.71. Overlapping area represents the amount of risk that can be diversified away by holding The A2 Milk and Blue Star Foods in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Blue Star Foods 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 Blue Star. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Blue Star Foods has no effect on the direction of A2 Milk i.e., A2 Milk and Blue Star go up and down completely randomly.

Pair Corralation between A2 Milk and Blue Star

Assuming the 90 days horizon The A2 Milk is expected to generate 0.24 times more return on investment than Blue Star. However, The A2 Milk is 4.21 times less risky than Blue Star. It trades about -0.11 of its potential returns per unit of risk. Blue Star Foods is currently generating about -0.18 per unit of risk. If you would invest  375.00  in The A2 Milk on September 29, 2024 and sell it today you would lose (38.00) from holding The A2 Milk or give up 10.13% of portfolio value over 90 days.

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

The A2 Milk  vs.  Blue Star Foods

A2 Milk

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days The A2 Milk has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unsteady performance in the last few months, the Stock's basic indicators remain fairly strong which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Blue Star Foods

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Blue Star Foods has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's technical and fundamental indicators remain rather sound which may send shares a bit higher in January 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Pair Trading with A2 Milk and Blue Star

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

The idea behind The A2 Milk and Blue Star Foods 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 Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.