Correlation Between Nestle SA and Glucose Health

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

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

Diversification Opportunities for Nestle SA and Glucose Health

-0.61

Correlation Coefficient

Nestle SA  Glucose Health

Excellent diversification

The 3 months correlation between Nestle and Glucose is -0.61. Overlapping area represents the amount of risk that can be diversified away by holding Nestle SA and Glucose Health in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Glucose Health 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 Glucose Health. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Glucose Health has no effect on the direction of Nestle SA i.e., Nestle SA and Glucose Health go up and down completely randomly.

Pair Corralation between Nestle SA and Glucose Health

Assuming the 90 days horizon Nestle SA is expected to generate 0.2 times more return on investment than Glucose Health. However, Nestle SA is 4.95 times less risky than Glucose Health. It trades about 0.24 of its potential returns per unit of risk. Glucose Health is currently generating about -0.07 per unit of risk. If you would invest  8,190  in Nestle SA on December 2, 2024 and sell it today you would earn a total of  1,412  from holding Nestle SA or generate 17.24% return on investment over 90 days.

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

Nestle SA  vs.  Glucose Health

Nestle SA

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Nestle SA are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain technical and fundamental indicators, Nestle SA may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Glucose Health

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Glucose Health are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of rather weak basic indicators, Glucose Health exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Nestle SA and Glucose Health

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

The idea behind Nestle SA and Glucose Health 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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.