Correlation Between Nestle India and Motilal Oswal

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

By analyzing existing cross correlation between Nestle India Limited and Motilal Oswal Financial, you can compare the effects of market volatilities on Nestle India and Motilal Oswal 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 Nestle India with a short position of Motilal Oswal. Check out your portfolio center. Please also check ongoing floating volatility patterns of Nestle India and Motilal Oswal.

Diversification Opportunities for Nestle India and Motilal Oswal

-0.81

Correlation Coefficient

Nestle India  Motilal Oswal

Pay attention - limited upside

The 3 months correlation between Nestle and Motilal is -0.81. Overlapping area represents the amount of risk that can be diversified away by holding Nestle India Limited and Motilal Oswal Financial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Motilal Oswal Financial and Nestle India 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 Nestle India Limited are associated (or correlated) with Motilal Oswal. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Motilal Oswal Financial has no effect on the direction of Nestle India i.e., Nestle India and Motilal Oswal go up and down completely randomly.

Pair Corralation between Nestle India and Motilal Oswal

Assuming the 90 days trading horizon Nestle India Limited is expected to generate 2.41 times more return on investment than Motilal Oswal. However, Nestle India is 2.41 times more volatile than Motilal Oswal Financial. It trades about 0.06 of its potential returns per unit of risk. Motilal Oswal Financial is currently generating about 0.08 per unit of risk. If you would invest  176,428  in Nestle India Limited on October 5, 2024 and sell it today you would earn a total of  43,592  from holding Nestle India Limited or generate 24.71% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Significant
Accuracy	99.55%
Values	Daily Returns

Nestle India Limited  vs.  Motilal Oswal Financial

Nestle India Limited

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Nestle India Limited has generated negative risk-adjusted returns adding no value to investors with long positions. Despite conflicting performance in the last few months, the Stock's forward indicators remain fairly strong which may send shares a bit higher in February 2025. The recent confusion may also be a sign of long-lasting up-swing for the firm traders.

Motilal Oswal Financial

Risk-Adjusted Performance

14 of 100

Good

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

Pair Trading with Nestle India and Motilal Oswal

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

The idea behind Nestle India Limited and Motilal Oswal Financial 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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.