Correlation Between Edible Garden and A2 Milk

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

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

Diversification Opportunities for Edible Garden and A2 Milk

-0.02

Correlation Coefficient

Edible Garden  A2 Milk

Good diversification

The 3 months correlation between Edible and ACOPY is -0.02. Overlapping area represents the amount of risk that can be diversified away by holding Edible Garden AG and The A2 Milk in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on A2 Milk and Edible Garden 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 Edible Garden AG 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 Edible Garden i.e., Edible Garden and A2 Milk go up and down completely randomly.

Pair Corralation between Edible Garden and A2 Milk

Given the investment horizon of 90 days Edible Garden AG is expected to under-perform the A2 Milk. In addition to that, Edible Garden is 3.45 times more volatile than The A2 Milk. It trades about -0.09 of its total potential returns per unit of risk. The A2 Milk is currently generating about -0.01 per unit of volatility. If you would invest  449.00  in The A2 Milk on September 23, 2024 and sell it today you would lose (104.00) from holding The A2 Milk or give up 23.16% of portfolio value over 90 days.

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

Edible Garden AG  vs.  The A2 Milk

Edible Garden AG

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Edible Garden AG has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fragile performance in the last few months, the Stock's fundamental drivers remain quite persistent which may send shares a bit higher in January 2025. The latest mess may also be a sign of long-standing up-swing for the company 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 fairly strong basic indicators, A2 Milk is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Edible Garden and A2 Milk

The main advantage of trading using opposite Edible Garden and A2 Milk positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Edible Garden 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 Edible Garden AG 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 Bond Analysis module to evaluate and analyze corporate bonds as a potential investment for your portfolios..