Correlation Between Sovos Brands and Nestle SA

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

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

Diversification Opportunities for Sovos Brands and Nestle SA

-0.68

Correlation Coefficient

Sovos Brands  Nestle SA

Excellent diversification

The 3 months correlation between Sovos and Nestle is -0.68. Overlapping area represents the amount of risk that can be diversified away by holding Sovos Brands and Nestle SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nestle SA and Sovos Brands 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 Sovos Brands are associated (or correlated) with Nestle SA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nestle SA has no effect on the direction of Sovos Brands i.e., Sovos Brands and Nestle SA go up and down completely randomly.

Pair Corralation between Sovos Brands and Nestle SA

If you would invest  1,862  in Sovos Brands on September 20, 2024 and sell it today you would earn a total of  0.00  from holding Sovos Brands or generate 0.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	1.59%
Values	Daily Returns

Sovos Brands  vs.  Nestle SA

Sovos Brands

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Sovos Brands has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy basic indicators, Sovos Brands is not utilizing all of its potentials. The current stock price disarray, may contribute to short-term losses for the investors.

Nestle SA

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Nestle SA has generated negative risk-adjusted returns adding no value to investors with long positions. Despite uncertain 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.

Pair Trading with Sovos Brands and Nestle SA

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

The idea behind Sovos Brands and Nestle SA 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 Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.