Correlation Between Vastned Retail and Nestlé SA

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

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

Diversification Opportunities for Vastned Retail and Nestlé SA

-0.22

Correlation Coefficient

Vastned Retail  Nestlé SA

Very good diversification

The 3 months correlation between Vastned and Nestlé is -0.22. Overlapping area represents the amount of risk that can be diversified away by holding Vastned Retail NV and Nestl SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nestlé SA and Vastned Retail 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 Vastned Retail NV 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 Vastned Retail i.e., Vastned Retail and Nestlé SA go up and down completely randomly.

Pair Corralation between Vastned Retail and Nestlé SA

Assuming the 90 days horizon Vastned Retail NV is expected to generate 0.77 times more return on investment than Nestlé SA. However, Vastned Retail NV is 1.3 times less risky than Nestlé SA. It trades about -0.04 of its potential returns per unit of risk. Nestl SA is currently generating about -0.22 per unit of risk. If you would invest  2,233  in Vastned Retail NV on September 13, 2024 and sell it today you would lose (48.00) from holding Vastned Retail NV or give up 2.15% of portfolio value over 90 days.

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

Vastned Retail NV  vs.  Nestl SA

Vastned Retail NV

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Vastned Retail NV has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Vastned Retail is not utilizing all of its potentials. The newest stock price disturbance, may contribute to mid-run losses for the stockholders.

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 January 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with Vastned Retail and Nestlé SA

The main advantage of trading using opposite Vastned Retail and Nestlé SA positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Vastned Retail 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 Vastned Retail NV 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 Bond Analysis module to evaluate and analyze corporate bonds as a potential investment for your portfolios..