Correlation Between Orkla ASA and A2 Milk
Can any of the company-specific risk be diversified away by investing in both Orkla ASA 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 Orkla ASA and A2 Milk into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Orkla ASA and The A2 Milk, you can compare the effects of market volatilities on Orkla ASA 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 Orkla ASA with a short position of A2 Milk. Check out your portfolio center. Please also check ongoing floating volatility patterns of Orkla ASA and A2 Milk.
Diversification Opportunities for Orkla ASA and A2 Milk
Good diversification
The 3 months correlation between Orkla and ACOPY is -0.11. Overlapping area represents the amount of risk that can be diversified away by holding Orkla ASA and The A2 Milk in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on A2 Milk and Orkla ASA 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 Orkla ASA 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 Orkla ASA i.e., Orkla ASA and A2 Milk go up and down completely randomly.
Pair Corralation between Orkla ASA and A2 Milk
Assuming the 90 days horizon Orkla ASA is expected to generate 1.54 times less return on investment than A2 Milk. But when comparing it to its historical volatility, Orkla ASA is 1.54 times less risky than A2 Milk. It trades about 0.06 of its potential returns per unit of risk. The A2 Milk is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest 266.00 in The A2 Milk on September 2, 2024 and sell it today you would earn a total of 109.00 from holding The A2 Milk or generate 40.98% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 66.94% |
| Values | Daily Returns |
Orkla ASA vs. The A2 Milk
Performance |
| Timeline |
| Orkla ASA |
| A2 Milk |
Orkla ASA and A2 Milk Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Orkla ASA and A2 Milk
The main advantage of trading using opposite Orkla ASA and A2 Milk positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Orkla ASA 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 Orkla ASA 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.| A2 Milk vs. Artisan Consumer Goods | A2 Milk vs. Altavoz Entertainment | A2 Milk vs. Avi Ltd ADR | A2 Milk vs. Aryzta AG PK |
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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.
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