Correlation Between GAZTRTECHNIUADR1/5EO01 and Nestl SA

Can any of the company-specific risk be diversified away by investing in both GAZTRTECHNIUADR1/5EO01 and Nestl SA 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 GAZTRTECHNIUADR1/5EO01 and Nestl SA into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between GAZTRTECHNIUADR15EO01 and Nestl SA, you can compare the effects of market volatilities on GAZTRTECHNIUADR1/5EO01 and Nestl SA 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 GAZTRTECHNIUADR1/5EO01 with a short position of Nestl SA. Check out your portfolio center. Please also check ongoing floating volatility patterns of GAZTRTECHNIUADR1/5EO01 and Nestl SA.

Diversification Opportunities for GAZTRTECHNIUADR1/5EO01 and Nestl SA

0.45

Correlation Coefficient

GAZTRTECHNIUADR1/5EO01  Nestl SA

Very weak diversification

The 3 months correlation between GAZTRTECHNIUADR1/5EO01 and Nestl is 0.45. Overlapping area represents the amount of risk that can be diversified away by holding GAZTRTECHNIUADR15EO01 and Nestl SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nestl SA and GAZTRTECHNIUADR1/5EO01 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 GAZTRTECHNIUADR15EO01 are associated (or correlated) with Nestl SA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nestl SA has no effect on the direction of GAZTRTECHNIUADR1/5EO01 i.e., GAZTRTECHNIUADR1/5EO01 and Nestl SA go up and down completely randomly.

Pair Corralation between GAZTRTECHNIUADR1/5EO01 and Nestl SA

Assuming the 90 days trading horizon GAZTRTECHNIUADR1/5EO01 is expected to generate 1.14 times less return on investment than Nestl SA. In addition to that, GAZTRTECHNIUADR1/5EO01 is 1.51 times more volatile than Nestl SA. It trades about 0.09 of its total potential returns per unit of risk. Nestl SA is currently generating about 0.16 per unit of volatility. If you would invest  8,040  in Nestl SA on December 28, 2024 and sell it today you would earn a total of  1,360  from holding Nestl SA or generate 16.92% return on investment over 90 days.

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

GAZTRTECHNIUADR15EO01  vs.  Nestl SA

GAZTRTECHNIUADR1/5EO01

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in GAZTRTECHNIUADR15EO01 are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain technical and fundamental indicators, GAZTRTECHNIUADR1/5EO01 reported solid returns over the last few months and may actually be approaching a breakup point.

Nestl SA

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Nestl SA are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain basic indicators, Nestl SA reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with GAZTRTECHNIUADR1/5EO01 and Nestl SA

The main advantage of trading using opposite GAZTRTECHNIUADR1/5EO01 and Nestl SA positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GAZTRTECHNIUADR1/5EO01 position performs unexpectedly, Nestl SA 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 Nestl SA will offset losses from the drop in Nestl SA's long position.

The idea behind GAZTRTECHNIUADR15EO01 and Nestl SA 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 Portfolio Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.