Correlation Between Nestle Bhd and Asian Pac

Can any of the company-specific risk be diversified away by investing in both Nestle Bhd and Asian Pac 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 Nestle Bhd and Asian Pac into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Nestle Bhd and Asian Pac Holdings, you can compare the effects of market volatilities on Nestle Bhd and Asian Pac 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 Nestle Bhd with a short position of Asian Pac. Check out your portfolio center. Please also check ongoing floating volatility patterns of Nestle Bhd and Asian Pac.

Diversification Opportunities for Nestle Bhd and Asian Pac

0.2

Correlation Coefficient

Nestle Bhd  Asian Pac

Modest diversification

The 3 months correlation between Nestle and Asian is 0.2. Overlapping area represents the amount of risk that can be diversified away by holding Nestle Bhd and Asian Pac Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Asian Pac Holdings and Nestle Bhd 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 Nestle Bhd are associated (or correlated) with Asian Pac. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Asian Pac Holdings has no effect on the direction of Nestle Bhd i.e., Nestle Bhd and Asian Pac go up and down completely randomly.

Pair Corralation between Nestle Bhd and Asian Pac

Assuming the 90 days trading horizon Nestle Bhd is expected to under-perform the Asian Pac. But the stock apears to be less risky and, when comparing its historical volatility, Nestle Bhd is 4.53 times less risky than Asian Pac. The stock trades about -0.16 of its potential returns per unit of risk. The Asian Pac Holdings is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest  10.00  in Asian Pac Holdings on October 13, 2024 and sell it today you would earn a total of  0.00  from holding Asian Pac Holdings or generate 0.0% return on investment over 90 days.

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

Nestle Bhd  vs.  Asian Pac Holdings

Nestle Bhd

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Nestle Bhd has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest conflicting performance, the Stock's basic indicators remain persistent and the latest mess on Wall Street may also be a sign of long-standing gains for the company institutional investors.

Asian Pac Holdings

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Asian Pac Holdings has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent basic indicators, Asian Pac is not utilizing all of its potentials. The latest stock price mess, may contribute to short-term losses for the institutional investors.

Pair Trading with Nestle Bhd and Asian Pac

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

The idea behind Nestle Bhd and Asian Pac Holdings 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 Stock Tickers module to use high-impact, comprehensive, and customizable stock tickers that can be easily integrated to any websites.