Correlation Between Kellanova and A2 Milk

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

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

Diversification Opportunities for Kellanova and A2 Milk

0.85

Correlation Coefficient

Kellanova  A2 Milk

Very poor diversification

The 3 months correlation between Kellanova and ACOPY is 0.85. Overlapping area represents the amount of risk that can be diversified away by holding Kellanova and The A2 Milk in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on A2 Milk and Kellanova 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 Kellanova are associated (or correlated) with A2 Milk. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of A2 Milk has no effect on the direction of Kellanova i.e., Kellanova and A2 Milk go up and down completely randomly.

Pair Corralation between Kellanova and A2 Milk

Taking into account the 90-day investment horizon Kellanova is expected to generate 18.93 times less return on investment than A2 Milk. But when comparing it to its historical volatility, Kellanova is 22.74 times less risky than A2 Milk. It trades about 0.27 of its potential returns per unit of risk. The A2 Milk is currently generating about 0.23 of returns per unit of risk over similar time horizon. If you would invest  334.00  in The A2 Milk on December 28, 2024 and sell it today you would earn a total of  203.00  from holding The A2 Milk or generate 60.78% return on investment over 90 days.

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

Kellanova  vs.  The A2 Milk

Kellanova

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Kellanova are ranked lower than 21 (%) of all global equities and portfolios over the last 90 days. Despite quite persistent forward-looking signals, Kellanova is not utilizing all of its potentials. The latest stock price mess, may contribute to short-term losses for the institutional investors.

A2 Milk

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in The A2 Milk are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak basic indicators, A2 Milk showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Kellanova and A2 Milk

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

The idea behind Kellanova and The A2 Milk 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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .