Correlation Between A2 Milk and WK Kellogg

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

Diversification Opportunities for A2 Milk and WK Kellogg

-0.36

Correlation Coefficient

A2 Milk  WK Kellogg

Very good diversification

The 3 months correlation between ACOPY and KLG is -0.36. Overlapping area represents the amount of risk that can be diversified away by holding The A2 Milk and WK Kellogg Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on WK Kellogg 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 WK Kellogg. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of WK Kellogg has no effect on the direction of A2 Milk i.e., A2 Milk and WK Kellogg go up and down completely randomly.

Pair Corralation between A2 Milk and WK Kellogg

Assuming the 90 days horizon The A2 Milk is expected to under-perform the WK Kellogg. But the pink sheet apears to be less risky and, when comparing its historical volatility, The A2 Milk is 1.1 times less risky than WK Kellogg. The pink sheet trades about -0.01 of its potential returns per unit of risk. The WK Kellogg Co is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest  1,616  in WK Kellogg Co on October 3, 2024 and sell it today you would earn a total of  183.00  from holding WK Kellogg Co or generate 11.32% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	66.95%
Values	Daily Returns

The A2 Milk  vs.  WK Kellogg Co

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 weak performance in the last few months, the Stock's basic indicators remain fairly strong which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

WK Kellogg

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in WK Kellogg Co are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile essential indicators, WK Kellogg may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with A2 Milk and WK Kellogg

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

The idea behind The A2 Milk and WK Kellogg Co 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.

Check out your portfolio center.

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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.