Correlation Between Emmi AG and Nestle SA

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

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

Diversification Opportunities for Emmi AG and Nestle SA

0.0

Correlation Coefficient

Emmi AG  Nestle SA

Pay attention - limited upside

The 3 months correlation between Emmi and Nestle is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding Emmi AG and Nestle SA ADR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nestle SA ADR and Emmi AG 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 Emmi AG 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 ADR has no effect on the direction of Emmi AG i.e., Emmi AG and Nestle SA go up and down completely randomly.

Pair Corralation between Emmi AG and Nestle SA

If you would invest  8,230  in Nestle SA ADR on October 24, 2024 and sell it today you would earn a total of  43.00  from holding Nestle SA ADR or generate 0.52% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

Emmi AG  vs.  Nestle SA ADR

Emmi AG

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Emmi AG has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Emmi AG is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Nestle SA ADR

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Nestle SA ADR has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of conflicting performance in the last few months, the Stock's technical and fundamental indicators remain fairly strong which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with Emmi AG and Nestle SA

The main advantage of trading using opposite Emmi AG and Nestle SA positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Emmi AG 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 Emmi AG and Nestle SA ADR 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 Headlines Timeline module to stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity.