Correlation Between Vital Farms and A2 Milk

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

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

Diversification Opportunities for Vital Farms and A2 Milk

0.43

Correlation Coefficient

Vital Farms  A2 Milk

Very weak diversification

The 3 months correlation between Vital and ACOPY is 0.43. Overlapping area represents the amount of risk that can be diversified away by holding Vital Farms and The A2 Milk in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on A2 Milk and Vital Farms 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 Vital Farms 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 Vital Farms i.e., Vital Farms and A2 Milk go up and down completely randomly.

Pair Corralation between Vital Farms and A2 Milk

Given the investment horizon of 90 days Vital Farms is expected to generate 1.18 times more return on investment than A2 Milk. However, Vital Farms is 1.18 times more volatile than The A2 Milk. It trades about 0.07 of its potential returns per unit of risk. The A2 Milk is currently generating about -0.01 per unit of risk. If you would invest  1,687  in Vital Farms on October 15, 2024 and sell it today you would earn a total of  2,326  from holding Vital Farms or generate 137.88% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	99.8%
Values	Daily Returns

Vital Farms  vs.  The A2 Milk

Vital Farms

Risk-Adjusted Performance

1 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Vital Farms are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite quite persistent basic indicators, Vital Farms 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

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.

Pair Trading with Vital Farms and A2 Milk

The main advantage of trading using opposite Vital Farms and A2 Milk positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Vital Farms 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 Vital Farms 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.

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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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.