Correlation Between J+J SNACK and Nestl SA

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

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

Diversification Opportunities for J+J SNACK and Nestl SA

-0.28

Correlation Coefficient

J+J SNACK  Nestl SA

Very good diversification

The 3 months correlation between J+J and Nestl is -0.28. Overlapping area represents the amount of risk that can be diversified away by holding JJ SNACK FOODS and Nestl SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nestl SA and J+J SNACK 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 JJ SNACK FOODS 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 J+J SNACK i.e., J+J SNACK and Nestl SA go up and down completely randomly.

Pair Corralation between J+J SNACK and Nestl SA

Assuming the 90 days trading horizon JJ SNACK FOODS is expected to under-perform the Nestl SA. In addition to that, J+J SNACK is 1.25 times more volatile than Nestl SA. It trades about -0.17 of its total potential returns per unit of risk. Nestl SA is currently generating about 0.19 per unit of volatility. If you would invest  7,920  in Nestl SA on December 26, 2024 and sell it today you would earn a total of  1,540  from holding Nestl SA or generate 19.44% return on investment over 90 days.

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

JJ SNACK FOODS  vs.  Nestl SA

JJ SNACK FOODS

Risk-Adjusted Performance

Very Weak

Over the last 90 days JJ SNACK FOODS has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fragile performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in April 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Nestl SA

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Nestl SA are ranked lower than 14 (%) 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 J+J SNACK and Nestl SA

The main advantage of trading using opposite J+J SNACK and Nestl SA positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if J+J SNACK 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 JJ SNACK FOODS 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 Equity Search module to search for actively traded equities including funds and ETFs from over 30 global markets.