Correlation Between A2 Milk and Grupo Herdez

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

Diversification Opportunities for A2 Milk and Grupo Herdez

0.77

Correlation Coefficient

A2 Milk  Grupo Herdez

Poor diversification

The 3 months correlation between ACOPY and Grupo is 0.77. Overlapping area represents the amount of risk that can be diversified away by holding The A2 Milk and Grupo Herdez SAB in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Grupo Herdez SAB 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 Grupo Herdez. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Grupo Herdez SAB has no effect on the direction of A2 Milk i.e., A2 Milk and Grupo Herdez go up and down completely randomly.

Pair Corralation between A2 Milk and Grupo Herdez

Assuming the 90 days horizon The A2 Milk is expected to under-perform the Grupo Herdez. In addition to that, A2 Milk is 4.43 times more volatile than Grupo Herdez SAB. It trades about -0.03 of its total potential returns per unit of risk. Grupo Herdez SAB is currently generating about -0.06 per unit of volatility. If you would invest  261.00  in Grupo Herdez SAB on September 5, 2024 and sell it today you would lose (10.00) from holding Grupo Herdez SAB or give up 3.83% of portfolio value over 90 days.

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

The A2 Milk  vs.  Grupo Herdez SAB

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 latest abnormal performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Grupo Herdez SAB

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Grupo Herdez SAB has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Grupo Herdez is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with A2 Milk and Grupo Herdez

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

The idea behind The A2 Milk and Grupo Herdez SAB 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 Bonds Directory module to find actively traded corporate debentures issued by US companies.