Correlation Between Blue Star and Nestle SA

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

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

Diversification Opportunities for Blue Star and Nestle SA

0.87

Correlation Coefficient

Blue Star  Nestle SA

Very poor diversification

The 3 months correlation between Blue and Nestle is 0.87. Overlapping area represents the amount of risk that can be diversified away by holding Blue Star Foods and Nestle SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nestle SA and Blue Star 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 Blue Star Foods are associated (or correlated) with Nestle SA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nestle SA has no effect on the direction of Blue Star i.e., Blue Star and Nestle SA go up and down completely randomly.

Pair Corralation between Blue Star and Nestle SA

Given the investment horizon of 90 days Blue Star Foods is expected to under-perform the Nestle SA. In addition to that, Blue Star is 8.71 times more volatile than Nestle SA. It trades about -0.11 of its total potential returns per unit of risk. Nestle SA is currently generating about -0.13 per unit of volatility. If you would invest  10,319  in Nestle SA on September 30, 2024 and sell it today you would lose (2,079) from holding Nestle SA or give up 20.15% of portfolio value over 90 days.

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

Blue Star Foods  vs.  Nestle SA

Blue Star Foods

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Blue Star Foods has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's technical and fundamental indicators remain rather sound which may send shares a bit higher in January 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Nestle SA

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Nestle SA has generated negative risk-adjusted returns adding no value to investors with long positions. Despite uncertain performance in the last few months, the Stock's technical and fundamental indicators remain nearly stable which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with Blue Star and Nestle SA

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

The idea behind Blue Star Foods and Nestle 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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.