Correlation Between Nestle Bhd and Sungei Bagan
Can any of the company-specific risk be diversified away by investing in both Nestle Bhd and Sungei Bagan 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 Nestle Bhd and Sungei Bagan into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Nestle Bhd and Sungei Bagan Rubber, you can compare the effects of market volatilities on Nestle Bhd and Sungei Bagan 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 Nestle Bhd with a short position of Sungei Bagan. Check out your portfolio center. Please also check ongoing floating volatility patterns of Nestle Bhd and Sungei Bagan.
Diversification Opportunities for Nestle Bhd and Sungei Bagan
0.63 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Nestle and Sungei is 0.63. Overlapping area represents the amount of risk that can be diversified away by holding Nestle Bhd and Sungei Bagan Rubber in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sungei Bagan Rubber and Nestle Bhd 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 Nestle Bhd are associated (or correlated) with Sungei Bagan. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sungei Bagan Rubber has no effect on the direction of Nestle Bhd i.e., Nestle Bhd and Sungei Bagan go up and down completely randomly.
Pair Corralation between Nestle Bhd and Sungei Bagan
Assuming the 90 days trading horizon Nestle Bhd is expected to generate 1.48 times more return on investment than Sungei Bagan. However, Nestle Bhd is 1.48 times more volatile than Sungei Bagan Rubber. It trades about -0.38 of its potential returns per unit of risk. Sungei Bagan Rubber is currently generating about -0.7 per unit of risk. If you would invest 10,264 in Nestle Bhd on August 28, 2024 and sell it today you would lose (764.00) from holding Nestle Bhd or give up 7.44% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Nestle Bhd vs. Sungei Bagan Rubber
Performance |
| Timeline |
| Nestle Bhd |
| Sungei Bagan Rubber |
Nestle Bhd and Sungei Bagan Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Nestle Bhd and Sungei Bagan
The main advantage of trading using opposite Nestle Bhd and Sungei Bagan positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Nestle Bhd position performs unexpectedly, Sungei Bagan 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 Sungei Bagan will offset losses from the drop in Sungei Bagan's long position.| Nestle Bhd vs. CSC Steel Holdings | Nestle Bhd vs. Senheng New Retail | Nestle Bhd vs. Diversified Gateway Solutions | Nestle Bhd vs. PIE Industrial Bhd |
| Sungei Bagan vs. Nova Wellness Group | Sungei Bagan vs. Ho Hup Construction | Sungei Bagan vs. PMB Technology Bhd | Sungei Bagan vs. DC HEALTHCARE 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 Portfolio Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.
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