Correlation Between Nestlé SA and Dow Jones
Can any of the company-specific risk be diversified away by investing in both Nestlé SA and Dow Jones 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 Nestlé SA and Dow Jones into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Nestl SA and Dow Jones Industrial, you can compare the effects of market volatilities on Nestlé SA and Dow Jones 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 Nestlé SA with a short position of Dow Jones. Check out your portfolio center. Please also check ongoing floating volatility patterns of Nestlé SA and Dow Jones.
Diversification Opportunities for Nestlé SA and Dow Jones
Very weak diversification
The 3 months correlation between Nestlé and Dow is 0.42. Overlapping area represents the amount of risk that can be diversified away by holding Nestl SA and Dow Jones Industrial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dow Jones Industrial and Nestlé 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 Dow Jones. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dow Jones Industrial has no effect on the direction of Nestlé SA i.e., Nestlé SA and Dow Jones go up and down completely randomly.
Pair Corralation between Nestlé SA and Dow Jones
Assuming the 90 days trading horizon Nestl SA is expected to generate 2.01 times more return on investment than Dow Jones. However, Nestlé SA is 2.01 times more volatile than Dow Jones Industrial. It trades about 0.14 of its potential returns per unit of risk. Dow Jones Industrial is currently generating about -0.04 per unit of risk. If you would invest 8,240 in Nestl SA on December 2, 2024 and sell it today you would earn a total of 1,060 from holding Nestl SA or generate 12.86% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Weak |
Accuracy | 98.39% |
Values | Daily Returns |
Nestl SA vs. Dow Jones Industrial
Performance |
Timeline |
Nestlé SA and Dow Jones Volatility Contrast
Predicted Return Density |
Returns |
Nestl SA
Pair trading matchups for Nestlé SA
Dow Jones Industrial
Pair trading matchups for Dow Jones
Pair Trading with Nestlé SA and Dow Jones
The main advantage of trading using opposite Nestlé SA and Dow Jones positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Nestlé SA position performs unexpectedly, Dow Jones 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 Dow Jones will offset losses from the drop in Dow Jones' long position.Nestlé SA vs. Solstad Offshore ASA | Nestlé SA vs. ULTRA CLEAN HLDGS | Nestlé SA vs. Perseus Mining Limited | Nestlé SA vs. GRIFFIN MINING LTD |
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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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.
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