Correlation Between Nestle SA and Kellanova

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

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

Diversification Opportunities for Nestle SA and Kellanova

-0.64

Correlation Coefficient

Nestle SA  Kellanova

Excellent diversification

The 3 months correlation between Nestle and Kellanova is -0.64. Overlapping area represents the amount of risk that can be diversified away by holding Nestle SA ADR and Kellanova in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Kellanova 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 ADR are associated (or correlated) with Kellanova. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Kellanova has no effect on the direction of Nestle SA i.e., Nestle SA and Kellanova go up and down completely randomly.

Pair Corralation between Nestle SA and Kellanova

Assuming the 90 days horizon Nestle SA ADR is expected to under-perform the Kellanova. In addition to that, Nestle SA is 5.92 times more volatile than Kellanova. It trades about -0.18 of its total potential returns per unit of risk. Kellanova is currently generating about 0.06 per unit of volatility. If you would invest  8,054  in Kellanova on September 24, 2024 and sell it today you would earn a total of  16.00  from holding Kellanova or generate 0.2% return on investment over 90 days.

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

Nestle SA ADR  vs.  Kellanova

Nestle SA ADR

Risk-Adjusted Performance

0 of 100

Very Weak

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

Kellanova

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Kellanova are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite quite persistent forward-looking signals, Kellanova is not utilizing all of its potentials. The current stock price mess, may contribute to short-term losses for the institutional investors.

Pair Trading with Nestle SA and Kellanova

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

The idea behind Nestle SA ADR and Kellanova 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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.