Correlation Between Silly Monks and Nestle India

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

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

Diversification Opportunities for Silly Monks and Nestle India

-0.17

Correlation Coefficient

Silly Monks  Nestle India

Good diversification

The 3 months correlation between Silly and Nestle is -0.17. Overlapping area represents the amount of risk that can be diversified away by holding Silly Monks Entertainment 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 Silly Monks 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 Silly Monks Entertainment 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 Silly Monks i.e., Silly Monks and Nestle India go up and down completely randomly.

Pair Corralation between Silly Monks and Nestle India

Assuming the 90 days trading horizon Silly Monks Entertainment is expected to under-perform the Nestle India. In addition to that, Silly Monks is 2.57 times more volatile than Nestle India Limited. It trades about -0.25 of its total potential returns per unit of risk. Nestle India Limited is currently generating about 0.06 per unit of volatility. If you would invest  215,265  in Nestle India Limited on December 27, 2024 and sell it today you would earn a total of  9,080  from holding Nestle India Limited or generate 4.22% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.39%
Values	Daily Returns

Silly Monks Entertainment  vs.  Nestle India Limited

Silly Monks Entertainment

Risk-Adjusted Performance

Very Weak

Over the last 90 days Silly Monks Entertainment has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of uncertain performance in the last few months, the Stock's basic indicators remain very healthy which may send shares a bit higher in April 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

Nestle India Limited

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Nestle India Limited are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite fairly strong forward indicators, Nestle India is not utilizing all of its potentials. The current stock price confusion, may contribute to short-horizon losses for the traders.

Pair Trading with Silly Monks and Nestle India

The main advantage of trading using opposite Silly Monks and Nestle India positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Silly Monks 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 Silly Monks Entertainment 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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.