Correlation Between Lerøy Seafood and Nestlé SA
Can any of the company-specific risk be diversified away by investing in both Lerøy Seafood 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 Lerøy Seafood and Nestlé SA into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Lery Seafood Group and Nestl SA, you can compare the effects of market volatilities on Lerøy Seafood 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 Lerøy Seafood with a short position of Nestlé SA. Check out your portfolio center. Please also check ongoing floating volatility patterns of Lerøy Seafood and Nestlé SA.
Diversification Opportunities for Lerøy Seafood and Nestlé SA
0.43 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Lerøy and Nestlé is 0.43. Overlapping area represents the amount of risk that can be diversified away by holding Lery Seafood Group and Nestl SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nestlé SA and Lerøy Seafood 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 Lery Seafood Group 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 Lerøy Seafood i.e., Lerøy Seafood and Nestlé SA go up and down completely randomly.
Pair Corralation between Lerøy Seafood and Nestlé SA
Assuming the 90 days horizon Lery Seafood Group is expected to under-perform the Nestlé SA. But the stock apears to be less risky and, when comparing its historical volatility, Lery Seafood Group is 1.23 times less risky than Nestlé SA. The stock trades about -0.29 of its potential returns per unit of risk. The Nestl SA is currently generating about 0.34 of returns per unit of risk over similar time horizon. If you would invest 8,200 in Nestl SA on December 2, 2024 and sell it today you would earn a total of 1,100 from holding Nestl SA or generate 13.41% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Weak |
Accuracy | 100.0% |
Values | Daily Returns |
Lery Seafood Group vs. Nestl SA
Performance |
Timeline |
Lery Seafood Group |
Nestlé SA |
Lerøy Seafood and Nestlé SA Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Lerøy Seafood and Nestlé SA
The main advantage of trading using opposite Lerøy Seafood and Nestlé SA positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Lerøy Seafood 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.Lerøy Seafood vs. Mowi ASA | Lerøy Seafood vs. LEROY SEAFOOD GRUNSPADR | Lerøy Seafood vs. Yihai International Holding | Lerøy Seafood vs. Lery Seafood Group |
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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 Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.
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