Correlation Between WILLIS LEASE and Nestl SA

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

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

Diversification Opportunities for WILLIS LEASE and Nestl SA

-0.72

Correlation Coefficient

WILLIS LEASE  Nestl SA

Pay attention - limited upside

The 3 months correlation between WILLIS and Nestl is -0.72. Overlapping area represents the amount of risk that can be diversified away by holding WILLIS LEASE FIN and Nestl SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nestl SA and WILLIS LEASE 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 WILLIS LEASE FIN 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 WILLIS LEASE i.e., WILLIS LEASE and Nestl SA go up and down completely randomly.

Pair Corralation between WILLIS LEASE and Nestl SA

Assuming the 90 days horizon WILLIS LEASE FIN is expected to under-perform the Nestl SA. In addition to that, WILLIS LEASE is 2.17 times more volatile than Nestl SA. It trades about -0.07 of its total potential returns per unit of risk. Nestl SA is currently generating about 0.16 per unit of volatility. If you would invest  8,040  in Nestl SA on December 29, 2024 and sell it today you would earn a total of  1,360  from holding Nestl SA or generate 16.92% return on investment over 90 days.

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

WILLIS LEASE FIN  vs.  Nestl SA

WILLIS LEASE FIN

Risk-Adjusted Performance

Very Weak

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

Nestl SA

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Nestl SA are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite nearly unsteady basic indicators, Nestl SA reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with WILLIS LEASE and Nestl SA

The main advantage of trading using opposite WILLIS LEASE and Nestl SA positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if WILLIS LEASE 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 WILLIS LEASE FIN 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.

Check out your portfolio center.

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 Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.