Correlation Between A2 Milk and Kerry Group

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

Diversification Opportunities for A2 Milk and Kerry Group

0.11

Correlation Coefficient

A2 Milk  Kerry Group

Average diversification

The 3 months correlation between ACOPY and Kerry is 0.11. Overlapping area represents the amount of risk that can be diversified away by holding The A2 Milk and Kerry Group plc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Kerry Group plc 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 Kerry Group. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Kerry Group plc has no effect on the direction of A2 Milk i.e., A2 Milk and Kerry Group go up and down completely randomly.

Pair Corralation between A2 Milk and Kerry Group

Assuming the 90 days horizon The A2 Milk is expected to generate 1.55 times more return on investment than Kerry Group. However, A2 Milk is 1.55 times more volatile than Kerry Group plc. It trades about 0.06 of its potential returns per unit of risk. Kerry Group plc is currently generating about -0.05 per unit of risk. If you would invest  354.00  in The A2 Milk on January 31, 2024 and sell it today you would earn a total of  18.00  from holding The A2 Milk or generate 5.08% return on investment over 90 days.

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

The A2 Milk  vs.  Kerry Group plc

A2 Milk

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in The A2 Milk are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, A2 Milk showed solid returns over the last few months and may actually be approaching a breakup point.

Kerry Group plc

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with A2 Milk and Kerry Group

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

The idea behind The A2 Milk and Kerry Group plc 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 Equity Valuation module to check real value of public entities based on technical and fundamental data.