Correlation Between A2 Milk and Vital Farms

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

Diversification Opportunities for A2 Milk and Vital Farms

0.53

Correlation Coefficient

A2 Milk  Vital Farms

Very weak diversification

The 3 months correlation between ACOPY and Vital is 0.53. Overlapping area represents the amount of risk that can be diversified away by holding The A2 Milk and Vital Farms in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vital Farms 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 Vital Farms. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vital Farms has no effect on the direction of A2 Milk i.e., A2 Milk and Vital Farms go up and down completely randomly.

Pair Corralation between A2 Milk and Vital Farms

Assuming the 90 days horizon A2 Milk is expected to generate 19.78 times less return on investment than Vital Farms. In addition to that, A2 Milk is 1.43 times more volatile than Vital Farms. It trades about 0.0 of its total potential returns per unit of risk. Vital Farms is currently generating about 0.07 per unit of volatility. If you would invest  3,482  in Vital Farms on September 26, 2024 and sell it today you would earn a total of  432.00  from holding Vital Farms or generate 12.41% return on investment over 90 days.

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

The A2 Milk  vs.  Vital Farms

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 latest stock price disturbance, may contribute to short-term losses for the investors.

Vital Farms

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Vital Farms are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite quite fragile basic indicators, Vital Farms disclosed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with A2 Milk and Vital Farms

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

The idea behind The A2 Milk and Vital Farms 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 Content Syndication module to quickly integrate customizable finance content to your own investment portal.