Correlation Between Nestle Bhd and Apollo Food

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

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

Diversification Opportunities for Nestle Bhd and Apollo Food

-0.18

Correlation Coefficient

Nestle Bhd  Apollo Food

Good diversification

The 3 months correlation between Nestle and Apollo is -0.18. Overlapping area represents the amount of risk that can be diversified away by holding Nestle Bhd and Apollo Food Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Apollo Food 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 Apollo Food. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Apollo Food Holdings has no effect on the direction of Nestle Bhd i.e., Nestle Bhd and Apollo Food go up and down completely randomly.

Pair Corralation between Nestle Bhd and Apollo Food

Assuming the 90 days trading horizon Nestle Bhd is expected to under-perform the Apollo Food. But the stock apears to be less risky and, when comparing its historical volatility, Nestle Bhd is 1.1 times less risky than Apollo Food. The stock trades about -0.25 of its potential returns per unit of risk. The Apollo Food Holdings is currently generating about 0.14 of returns per unit of risk over similar time horizon. If you would invest  606.00  in Apollo Food Holdings on December 4, 2024 and sell it today you would earn a total of  73.00  from holding Apollo Food Holdings or generate 12.05% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.33%
Values	Daily Returns

Nestle Bhd  vs.  Apollo Food Holdings

Nestle Bhd

Risk-Adjusted Performance

Very Weak

Over the last 90 days Nestle 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 April 2025. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

Apollo Food Holdings

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Apollo Food Holdings are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite quite conflicting basic indicators, Apollo Food disclosed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Nestle Bhd and Apollo Food

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

The idea behind Nestle Bhd and Apollo Food 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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.