Correlation Between Nestl SA and SCIENCE IN

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

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

Diversification Opportunities for Nestl SA and SCIENCE IN

0.79

Correlation Coefficient

Nestl SA  SCIENCE IN

Poor diversification

The 3 months correlation between Nestl and SCIENCE is 0.79. Overlapping area represents the amount of risk that can be diversified away by holding Nestl SA and SCIENCE IN SPORT in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SCIENCE IN SPORT and Nestl SA 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 Nestl SA are associated (or correlated) with SCIENCE IN. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SCIENCE IN SPORT has no effect on the direction of Nestl SA i.e., Nestl SA and SCIENCE IN go up and down completely randomly.

Pair Corralation between Nestl SA and SCIENCE IN

Assuming the 90 days trading horizon Nestl SA is expected to generate 0.73 times more return on investment than SCIENCE IN. However, Nestl SA is 1.38 times less risky than SCIENCE IN. It trades about 0.16 of its potential returns per unit of risk. SCIENCE IN SPORT is currently generating about 0.06 per unit of risk. If you would invest  8,040  in Nestl SA on December 29, 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	Significant
Accuracy	100.0%
Values	Daily Returns

Nestl SA  vs.  SCIENCE IN SPORT

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 unsteady basic indicators, Nestl SA reported solid returns over the last few months and may actually be approaching a breakup point.

SCIENCE IN SPORT

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in SCIENCE IN SPORT are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, SCIENCE IN may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Nestl SA and SCIENCE IN

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

The idea behind Nestl SA and SCIENCE IN SPORT 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.

Check out your portfolio center.

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 Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.