Correlation Between Nestle Bhd and Apex Healthcare

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

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

Diversification Opportunities for Nestle Bhd and Apex Healthcare

0.73

Correlation Coefficient

Nestle Bhd  Apex Healthcare

Poor diversification

The 3 months correlation between Nestle and Apex is 0.73. Overlapping area represents the amount of risk that can be diversified away by holding Nestle Bhd and Apex Healthcare Bhd in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Apex Healthcare 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 Apex Healthcare. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Apex Healthcare Bhd has no effect on the direction of Nestle Bhd i.e., Nestle Bhd and Apex Healthcare go up and down completely randomly.

Pair Corralation between Nestle Bhd and Apex Healthcare

Assuming the 90 days trading horizon Nestle Bhd is expected to generate 1.31 times more return on investment than Apex Healthcare. However, Nestle Bhd is 1.31 times more volatile than Apex Healthcare Bhd. It trades about -0.08 of its potential returns per unit of risk. Apex Healthcare Bhd is currently generating about -0.15 per unit of risk. If you would invest  10,323  in Nestle Bhd on September 2, 2024 and sell it today you would lose (653.00) from holding Nestle Bhd or give up 6.33% of portfolio value over 90 days.

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

Nestle Bhd  vs.  Apex Healthcare 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.

Apex Healthcare Bhd

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Apex Healthcare 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.

Pair Trading with Nestle Bhd and Apex Healthcare

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

The idea behind Nestle Bhd and Apex Healthcare 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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.