Correlation Between DATAGROUP and Nestlé SA

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

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

Diversification Opportunities for DATAGROUP and Nestlé SA

-0.72

Correlation Coefficient

DATAGROUP  Nestlé SA

Pay attention - limited upside

The 3 months correlation between DATAGROUP and Nestlé is -0.72. Overlapping area represents the amount of risk that can be diversified away by holding DATAGROUP SE and Nestl SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nestlé SA and DATAGROUP 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 DATAGROUP SE are associated (or correlated) with Nestlé SA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nestlé SA has no effect on the direction of DATAGROUP i.e., DATAGROUP and Nestlé SA go up and down completely randomly.

Pair Corralation between DATAGROUP and Nestlé SA

Assuming the 90 days trading horizon DATAGROUP SE is expected to under-perform the Nestlé SA. In addition to that, DATAGROUP is 1.36 times more volatile than Nestl SA. It trades about -0.07 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  8,080  in Nestl SA on December 11, 2024 and sell it today you would earn a total of  1,300  from holding Nestl SA or generate 16.09% return on investment over 90 days.

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

DATAGROUP SE  vs.  Nestl SA

DATAGROUP SE

Risk-Adjusted Performance

Very Weak

Over the last 90 days DATAGROUP SE has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest uncertain performance, the Stock's technical indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

Nestlé 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, Nestlé SA reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with DATAGROUP and Nestlé SA

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

The idea behind DATAGROUP SE 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 ETFs module to find actively traded Exchange Traded Funds (ETF) from around the world.