Correlation Between TIANDE CHEMICAL and Nestlé SA

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

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

Diversification Opportunities for TIANDE CHEMICAL and Nestlé SA

-0.28

Correlation Coefficient

TIANDE CHEMICAL  Nestlé SA

Very good diversification

The 3 months correlation between TIANDE and Nestlé is -0.28. Overlapping area represents the amount of risk that can be diversified away by holding TIANDE CHEMICAL and Nestl SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nestlé SA and TIANDE CHEMICAL 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 TIANDE CHEMICAL are associated (or correlated) with Nestlé SA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nestlé SA has no effect on the direction of TIANDE CHEMICAL i.e., TIANDE CHEMICAL and Nestlé SA go up and down completely randomly.

Pair Corralation between TIANDE CHEMICAL and Nestlé SA

If you would invest  7.25  in TIANDE CHEMICAL on October 22, 2024 and sell it today you would earn a total of  0.00  from holding TIANDE CHEMICAL or generate 0.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.33%
Values	Daily Returns

TIANDE CHEMICAL  vs.  Nestl SA

TIANDE CHEMICAL

Risk-Adjusted Performance

0 of 100

Very Weak

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

Nestlé SA

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with TIANDE CHEMICAL and Nestlé SA

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

The idea behind TIANDE CHEMICAL and Nestl 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 Portfolio Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.