Correlation Between One 97 and Nestle India

Can any of the company-specific risk be diversified away by investing in both One 97 and Nestle India 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 One 97 and Nestle India into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between One 97 Communications and Nestle India Limited, you can compare the effects of market volatilities on One 97 and Nestle India 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 One 97 with a short position of Nestle India. Check out your portfolio center. Please also check ongoing floating volatility patterns of One 97 and Nestle India.

Diversification Opportunities for One 97 and Nestle India

-0.62

Correlation Coefficient

One 97  Nestle India

Excellent diversification

The 3 months correlation between One and Nestle is -0.62. Overlapping area represents the amount of risk that can be diversified away by holding One 97 Communications and Nestle India Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nestle India Limited and One 97 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 One 97 Communications are associated (or correlated) with Nestle India. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nestle India Limited has no effect on the direction of One 97 i.e., One 97 and Nestle India go up and down completely randomly.

Pair Corralation between One 97 and Nestle India

Assuming the 90 days trading horizon One 97 Communications is expected to generate 3.32 times more return on investment than Nestle India. However, One 97 is 3.32 times more volatile than Nestle India Limited. It trades about 0.2 of its potential returns per unit of risk. Nestle India Limited is currently generating about -0.12 per unit of risk. If you would invest  46,165  in One 97 Communications on October 7, 2024 and sell it today you would earn a total of  52,115  from holding One 97 Communications or generate 112.89% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	99.19%
Values	Daily Returns

One 97 Communications  vs.  Nestle India Limited

One 97 Communications

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in One 97 Communications are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. In spite of very unsteady basic indicators, One 97 displayed solid returns over the last few months and may actually be approaching a breakup point.

Nestle India Limited

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Nestle India Limited has generated negative risk-adjusted returns adding no value to investors with long positions. Despite conflicting performance in the last few months, the Stock's forward indicators remain fairly strong which may send shares a bit higher in February 2025. The recent confusion may also be a sign of long-lasting up-swing for the firm traders.

Pair Trading with One 97 and Nestle India

The main advantage of trading using opposite One 97 and Nestle India positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if One 97 position performs unexpectedly, Nestle India 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 Nestle India will offset losses from the drop in Nestle India's long position.

The idea behind One 97 Communications and Nestle India Limited 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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.