Correlation Between Toyo Suisan and A2 Milk

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

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

Diversification Opportunities for Toyo Suisan and A2 Milk

-0.48

Correlation Coefficient

Toyo Suisan  A2 Milk

Very good diversification

The 3 months correlation between Toyo and ACOPY is -0.48. Overlapping area represents the amount of risk that can be diversified away by holding Toyo Suisan Kaisha and The A2 Milk in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on A2 Milk and Toyo Suisan 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 Toyo Suisan Kaisha 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 Toyo Suisan i.e., Toyo Suisan and A2 Milk go up and down completely randomly.

Pair Corralation between Toyo Suisan and A2 Milk

Assuming the 90 days horizon Toyo Suisan is expected to generate 1.28 times less return on investment than A2 Milk. But when comparing it to its historical volatility, Toyo Suisan Kaisha is 1.32 times less risky than A2 Milk. It trades about 0.11 of its potential returns per unit of risk. The A2 Milk is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest  315.00  in The A2 Milk on September 20, 2024 and sell it today you would earn a total of  30.00  from holding The A2 Milk or generate 9.52% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

Toyo Suisan Kaisha  vs.  The A2 Milk

Toyo Suisan Kaisha

Risk-Adjusted Performance

2 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Toyo Suisan Kaisha are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of fairly uncertain forward-looking signals, Toyo Suisan may actually be approaching a critical reversion point that can send shares even higher in January 2025.

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 fairly strong basic indicators, A2 Milk is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Toyo Suisan and A2 Milk

The main advantage of trading using opposite Toyo Suisan and A2 Milk positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Toyo Suisan 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 Toyo Suisan Kaisha 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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.