Correlation Between Nestle Bhd and Aeon Credit

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

By analyzing existing cross correlation between Nestle Bhd and Aeon Credit Service, you can compare the effects of market volatilities on Nestle Bhd and Aeon Credit 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 Aeon Credit. Check out your portfolio center. Please also check ongoing floating volatility patterns of Nestle Bhd and Aeon Credit.

Diversification Opportunities for Nestle Bhd and Aeon Credit

0.36

Correlation Coefficient

Nestle Bhd  Aeon Credit

Weak diversification

The 3 months correlation between Nestle and Aeon is 0.36. Overlapping area represents the amount of risk that can be diversified away by holding Nestle Bhd and Aeon Credit Service in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Aeon Credit Service 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 Aeon Credit. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Aeon Credit Service has no effect on the direction of Nestle Bhd i.e., Nestle Bhd and Aeon Credit go up and down completely randomly.

Pair Corralation between Nestle Bhd and Aeon Credit

Assuming the 90 days trading horizon Nestle Bhd is expected to generate 1.26 times more return on investment than Aeon Credit. However, Nestle Bhd is 1.26 times more volatile than Aeon Credit Service. It trades about -0.15 of its potential returns per unit of risk. Aeon Credit Service is currently generating about -0.28 per unit of risk. If you would invest  10,214  in Nestle Bhd on October 24, 2024 and sell it today you would lose (1,064) from holding Nestle Bhd or give up 10.42% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	98.39%
Values	Daily Returns

Nestle Bhd  vs.  Aeon Credit Service

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.

Aeon Credit Service

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Aeon Credit Service 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 February 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 Aeon Credit

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

The idea behind Nestle Bhd and Aeon Credit Service 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 Sync Your Broker module to sync your existing holdings, watchlists, positions or portfolios from thousands of online brokerage services, banks, investment account aggregators and robo-advisors..