Correlation Between Kluang Rubber and Nestle Bhd
Can any of the company-specific risk be diversified away by investing in both Kluang Rubber and Nestle Bhd 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 Kluang Rubber and Nestle Bhd into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Kluang Rubber and Nestle Bhd, you can compare the effects of market volatilities on Kluang Rubber and Nestle Bhd 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 Kluang Rubber with a short position of Nestle Bhd. Check out your portfolio center. Please also check ongoing floating volatility patterns of Kluang Rubber and Nestle Bhd.
Diversification Opportunities for Kluang Rubber and Nestle Bhd
0.31 | Correlation Coefficient |
Weak diversification
The 3 months correlation between Kluang and Nestle is 0.31. Overlapping area represents the amount of risk that can be diversified away by holding Kluang Rubber and Nestle Bhd in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nestle Bhd and Kluang Rubber 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 Kluang Rubber are associated (or correlated) with Nestle Bhd. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nestle Bhd has no effect on the direction of Kluang Rubber i.e., Kluang Rubber and Nestle Bhd go up and down completely randomly.
Pair Corralation between Kluang Rubber and Nestle Bhd
Assuming the 90 days trading horizon Kluang Rubber is expected to generate 2.03 times more return on investment than Nestle Bhd. However, Kluang Rubber is 2.03 times more volatile than Nestle Bhd. It trades about 0.07 of its potential returns per unit of risk. Nestle Bhd is currently generating about -0.14 per unit of risk. If you would invest 567.00 in Kluang Rubber on September 12, 2024 and sell it today you would earn a total of 14.00 from holding Kluang Rubber or generate 2.47% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Kluang Rubber vs. Nestle Bhd
Performance |
| Timeline |
| Kluang Rubber |
| Nestle Bhd |
Kluang Rubber and Nestle Bhd Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Kluang Rubber and Nestle Bhd
The main advantage of trading using opposite Kluang Rubber and Nestle Bhd positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Kluang Rubber position performs unexpectedly, Nestle Bhd 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 Nestle Bhd will offset losses from the drop in Nestle Bhd's long position.| Kluang Rubber vs. Nestle Bhd | Kluang Rubber vs. British American Tobacco | Kluang Rubber vs. FARM FRESH BERHAD | Kluang Rubber vs. Kawan Food Bhd |
| Nestle Bhd vs. British American Tobacco | Nestle Bhd vs. FARM FRESH BERHAD | Nestle Bhd vs. Kawan Food Bhd | Nestle Bhd vs. Apollo Food Holdings |
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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.
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