Correlation Between Nestle SA and Nates Food

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

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

Diversification Opportunities for Nestle SA and Nates Food

0.0

Correlation Coefficient

Nestle SA  Nates Food

Pay attention - limited upside

The 3 months correlation between Nestle and Nates is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding Nestle SA and Nates Food Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nates 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 Nates Food. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nates Food has no effect on the direction of Nestle SA i.e., Nestle SA and Nates Food go up and down completely randomly.

Pair Corralation between Nestle SA and Nates Food

Assuming the 90 days horizon Nestle SA is expected to under-perform the Nates Food. But the pink sheet apears to be less risky and, when comparing its historical volatility, Nestle SA is 12.1 times less risky than Nates Food. The pink sheet trades about -0.07 of its potential returns per unit of risk. The Nates Food Co is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest  0.10  in Nates Food Co on September 23, 2024 and sell it today you would lose (0.09) from holding Nates Food Co or give up 90.0% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

Nestle SA  vs.  Nates Food Co

Nestle SA

Risk-Adjusted Performance

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Very Weak

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

Nates Food

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Nates Food Co has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound primary indicators, Nates Food is not utilizing all of its potentials. The recent stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Nestle SA and Nates Food

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

The idea behind Nestle SA and Nates Food Co 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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.