Correlation Between Nestle Bhd and PPB Group

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

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

Diversification Opportunities for Nestle Bhd and PPB Group

0.71

Correlation Coefficient

Nestle Bhd  PPB Group

Poor diversification

The 3 months correlation between Nestle and PPB is 0.71. Overlapping area represents the amount of risk that can be diversified away by holding Nestle Bhd and PPB Group Bhd in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PPB Group Bhd 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 PPB Group. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of PPB Group Bhd has no effect on the direction of Nestle Bhd i.e., Nestle Bhd and PPB Group go up and down completely randomly.

Pair Corralation between Nestle Bhd and PPB Group

Assuming the 90 days trading horizon Nestle Bhd is expected to generate 0.95 times more return on investment than PPB Group. However, Nestle Bhd is 1.06 times less risky than PPB Group. It trades about 0.17 of its potential returns per unit of risk. PPB Group Bhd is currently generating about -0.37 per unit of risk. If you would invest  9,410  in Nestle Bhd on September 27, 2024 and sell it today you would earn a total of  370.00  from holding Nestle Bhd or generate 3.93% return on investment over 90 days.

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

Nestle Bhd  vs.  PPB Group Bhd

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 quite persistent basic indicators, Nestle Bhd is not utilizing all of its potentials. The latest stock price mess, may contribute to short-term losses for the institutional investors.

PPB Group Bhd

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days PPB Group Bhd has generated negative risk-adjusted returns adding no value to investors with long positions. Despite conflicting performance in the last few months, the Stock's basic indicators 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.

Pair Trading with Nestle Bhd and PPB Group

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

The idea behind Nestle Bhd and PPB Group Bhd 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 CEOs Directory module to screen CEOs from public companies around the world.