Correlation Between Nestle SA and Koios Beverage

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

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

Diversification Opportunities for Nestle SA and Koios Beverage

-0.07

Correlation Coefficient

Nestle SA  Koios Beverage

Good diversification

The 3 months correlation between Nestle and Koios is -0.07. Overlapping area represents the amount of risk that can be diversified away by holding Nestle SA and Koios Beverage Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Koios Beverage Corp 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 Koios Beverage. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Koios Beverage Corp has no effect on the direction of Nestle SA i.e., Nestle SA and Koios Beverage go up and down completely randomly.

Pair Corralation between Nestle SA and Koios Beverage

Assuming the 90 days horizon Nestle SA is expected to generate 78.76 times less return on investment than Koios Beverage. But when comparing it to its historical volatility, Nestle SA is 89.94 times less risky than Koios Beverage. It trades about 0.2 of its potential returns per unit of risk. Koios Beverage Corp is currently generating about 0.17 of returns per unit of risk over similar time horizon. If you would invest  4.00  in Koios Beverage Corp on December 11, 2024 and sell it today you would earn a total of  5.83  from holding Koios Beverage Corp or generate 145.75% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	95.16%
Values	Daily Returns

Nestle SA  vs.  Koios Beverage Corp

Nestle SA

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Nestle SA are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain technical and fundamental indicators, Nestle SA reported solid returns over the last few months and may actually be approaching a breakup point.

Koios Beverage Corp

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Koios Beverage Corp are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak basic indicators, Koios Beverage reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Nestle SA and Koios Beverage

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

The idea behind Nestle SA and Koios Beverage 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.

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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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.