Correlation Between A2 Milk and RLX Technology

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

Diversification Opportunities for A2 Milk and RLX Technology

-0.41

Correlation Coefficient

A2 Milk  RLX Technology

Very good diversification

The 3 months correlation between ACOPY and RLX is -0.41. Overlapping area represents the amount of risk that can be diversified away by holding The A2 Milk and RLX Technology in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on RLX Technology 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 RLX Technology. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of RLX Technology has no effect on the direction of A2 Milk i.e., A2 Milk and RLX Technology go up and down completely randomly.

Pair Corralation between A2 Milk and RLX Technology

Assuming the 90 days horizon The A2 Milk is expected to under-perform the RLX Technology. In addition to that, A2 Milk is 1.76 times more volatile than RLX Technology. It trades about -0.11 of its total potential returns per unit of risk. RLX Technology is currently generating about 0.09 per unit of volatility. If you would invest  198.00  in RLX Technology on September 29, 2024 and sell it today you would earn a total of  8.00  from holding RLX Technology or generate 4.04% return on investment over 90 days.

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

The A2 Milk  vs.  RLX Technology

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 unsteady performance in the last few months, the Stock's basic indicators remain fairly strong which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

RLX Technology

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in RLX Technology are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak essential indicators, RLX Technology showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with A2 Milk and RLX Technology

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

The idea behind The A2 Milk and RLX Technology 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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.