Correlation Between WT OFFSHORE and Nestl SA

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

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

Diversification Opportunities for WT OFFSHORE and Nestl SA

0.66

Correlation Coefficient

WT OFFSHORE  Nestl SA

Poor diversification

The 3 months correlation between UWV and Nestl is 0.66. Overlapping area represents the amount of risk that can be diversified away by holding WT OFFSHORE and Nestl SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nestl SA and WT OFFSHORE 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 WT OFFSHORE are associated (or correlated) with Nestl SA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nestl SA has no effect on the direction of WT OFFSHORE i.e., WT OFFSHORE and Nestl SA go up and down completely randomly.

Pair Corralation between WT OFFSHORE and Nestl SA

Assuming the 90 days trading horizon WT OFFSHORE is expected to generate 4.35 times more return on investment than Nestl SA. However, WT OFFSHORE is 4.35 times more volatile than Nestl SA. It trades about 0.11 of its potential returns per unit of risk. Nestl SA is currently generating about -0.06 per unit of risk. If you would invest  155.00  in WT OFFSHORE on October 26, 2024 and sell it today you would earn a total of  11.00  from holding WT OFFSHORE or generate 7.1% return on investment over 90 days.

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

WT OFFSHORE  vs.  Nestl SA

WT OFFSHORE

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days WT OFFSHORE has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest fragile performance, the Stock's basic indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

Nestl 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 uncertain 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 WT OFFSHORE and Nestl SA

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

The idea behind WT OFFSHORE 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 Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.