Correlation Between Nestle SA and China Marine

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

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

Diversification Opportunities for Nestle SA and China Marine

0.82

Correlation Coefficient

Nestle SA  China Marine

Very poor diversification

The 3 months correlation between Nestle and China is 0.82. Overlapping area represents the amount of risk that can be diversified away by holding Nestle SA and China Marine Food in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on China Marine Food and Nestle 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 Nestle SA are associated (or correlated) with China Marine. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of China Marine Food has no effect on the direction of Nestle SA i.e., Nestle SA and China Marine go up and down completely randomly.

Pair Corralation between Nestle SA and China Marine

If you would invest  0.01  in China Marine Food on October 3, 2024 and sell it today you would earn a total of  0.00  from holding China Marine Food or generate 0.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	0.37%
Values	Daily Returns

Nestle SA  vs.  China Marine Food

Nestle SA

Risk-Adjusted Performance

0 of 100

Very Weak

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

China Marine Food

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days China Marine Food has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy technical and fundamental indicators, China Marine is not utilizing all of its potentials. The newest stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Nestle SA and China Marine

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

The idea behind Nestle SA and China Marine Food 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 Portfolio Center module to all portfolio management and optimization tools to improve performance of your portfolios.