Correlation Between Nestle SA and Campbell Soup

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

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

Diversification Opportunities for Nestle SA and Campbell Soup

0.71

Correlation Coefficient

Nestle SA  Campbell Soup

Poor diversification

The 3 months correlation between Nestle and Campbell is 0.71. Overlapping area represents the amount of risk that can be diversified away by holding Nestle SA and Campbell Soup in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Campbell Soup 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 Campbell Soup. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Campbell Soup has no effect on the direction of Nestle SA i.e., Nestle SA and Campbell Soup go up and down completely randomly.

Pair Corralation between Nestle SA and Campbell Soup

Assuming the 90 days horizon Nestle SA is expected to under-perform the Campbell Soup. But the pink sheet apears to be less risky and, when comparing its historical volatility, Nestle SA is 1.46 times less risky than Campbell Soup. The pink sheet trades about -0.26 of its potential returns per unit of risk. The Campbell Soup is currently generating about -0.15 of returns per unit of risk over similar time horizon. If you would invest  4,559  in Campbell Soup on October 9, 2024 and sell it today you would lose (415.00) from holding Campbell Soup or give up 9.1% of portfolio value over 90 days.

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

Nestle SA  vs.  Campbell Soup

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.

Campbell Soup

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Campbell Soup 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 basic indicators remain somewhat strong which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with Nestle SA and Campbell Soup

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

The idea behind Nestle SA and Campbell Soup 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 Piotroski F Score module to get Piotroski F Score based on the binary analysis strategy of nine different fundamentals.