Correlation Between A2 Milk and Nichirei

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

Diversification Opportunities for A2 Milk and Nichirei

-0.31

Correlation Coefficient

A2 Milk  Nichirei

Very good diversification

The 3 months correlation between ACOPY and Nichirei is -0.31. Overlapping area represents the amount of risk that can be diversified away by holding The A2 Milk and Nichirei in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nichirei 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 Nichirei. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nichirei has no effect on the direction of A2 Milk i.e., A2 Milk and Nichirei go up and down completely randomly.

Pair Corralation between A2 Milk and Nichirei

Assuming the 90 days horizon A2 Milk is expected to generate 1.29 times less return on investment than Nichirei. In addition to that, A2 Milk is 2.3 times more volatile than Nichirei. It trades about 0.02 of its total potential returns per unit of risk. Nichirei is currently generating about 0.06 per unit of volatility. If you would invest  928.00  in Nichirei on June 23, 2024 and sell it today you would earn a total of  282.00  from holding Nichirei or generate 30.39% return on investment over 90 days.

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

The A2 Milk  vs.  Nichirei

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 uncertain performance in the last few months, the Stock's basic indicators remain fairly strong which may send shares a bit higher in October 2024. The current disturbance may also be a sign of long term up-swing for the company investors.

Nichirei

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Nichirei has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong technical and fundamental indicators, Nichirei is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with A2 Milk and Nichirei

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

The idea behind The A2 Milk and Nichirei 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 Technical Analysis module to check basic technical indicators and analysis based on most latest market data.