Correlation Between Nestlé SA and GameStop Corp

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

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

Diversification Opportunities for Nestlé SA and GameStop Corp

-0.93

Correlation Coefficient

Nestlé SA  GameStop Corp

Pay attention - limited upside

The 3 months correlation between Nestlé and GameStop is -0.93. Overlapping area represents the amount of risk that can be diversified away by holding Nestl SA and GameStop Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on GameStop Corp 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 GameStop Corp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of GameStop Corp has no effect on the direction of Nestlé SA i.e., Nestlé SA and GameStop Corp go up and down completely randomly.

Pair Corralation between Nestlé SA and GameStop Corp

Assuming the 90 days trading horizon Nestl SA is expected to under-perform the GameStop Corp. But the stock apears to be less risky and, when comparing its historical volatility, Nestl SA is 3.69 times less risky than GameStop Corp. The stock trades about -0.21 of its potential returns per unit of risk. The GameStop Corp is currently generating about 0.19 of returns per unit of risk over similar time horizon. If you would invest  1,794  in GameStop Corp on September 15, 2024 and sell it today you would earn a total of  928.00  from holding GameStop Corp or generate 51.73% return on investment over 90 days.

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

Nestl SA  vs.  GameStop Corp

Nestlé SA

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Nestl SA has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fragile performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

GameStop Corp

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in GameStop Corp are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, GameStop Corp reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Nestlé SA and GameStop Corp

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

The idea behind Nestl SA and GameStop Corp 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 Stock Tickers module to use high-impact, comprehensive, and customizable stock tickers that can be easily integrated to any websites.