Correlation Between Nestle Bhd and Petronas Chemicals
Can any of the company-specific risk be diversified away by investing in both Nestle Bhd and Petronas Chemicals 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 Petronas Chemicals into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Nestle Bhd and Petronas Chemicals Group, you can compare the effects of market volatilities on Nestle Bhd and Petronas Chemicals 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 Petronas Chemicals. Check out your portfolio center. Please also check ongoing floating volatility patterns of Nestle Bhd and Petronas Chemicals.
Diversification Opportunities for Nestle Bhd and Petronas Chemicals
0.82 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Nestle and Petronas is 0.82. Overlapping area represents the amount of risk that can be diversified away by holding Nestle Bhd and Petronas Chemicals Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Petronas Chemicals 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 Petronas Chemicals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Petronas Chemicals has no effect on the direction of Nestle Bhd i.e., Nestle Bhd and Petronas Chemicals go up and down completely randomly.
Pair Corralation between Nestle Bhd and Petronas Chemicals
Assuming the 90 days trading horizon Nestle Bhd is expected to generate 14.25 times less return on investment than Petronas Chemicals. But when comparing it to its historical volatility, Nestle Bhd is 2.3 times less risky than Petronas Chemicals. It trades about 0.02 of its potential returns per unit of risk. Petronas Chemicals Group is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest 455.00 in Petronas Chemicals Group on September 18, 2024 and sell it today you would earn a total of 23.00 from holding Petronas Chemicals Group or generate 5.05% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Nestle Bhd vs. Petronas Chemicals Group
Performance |
| Timeline |
| Nestle Bhd |
| Petronas Chemicals |
Nestle Bhd and Petronas Chemicals Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Nestle Bhd and Petronas Chemicals
The main advantage of trading using opposite Nestle Bhd and Petronas Chemicals positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Nestle Bhd position performs unexpectedly, Petronas Chemicals 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 Petronas Chemicals will offset losses from the drop in Petronas Chemicals' long position.| Nestle Bhd vs. British American Tobacco | Nestle Bhd vs. FARM FRESH BERHAD | Nestle Bhd vs. Apollo Food Holdings | Nestle Bhd vs. Oriental Food Industries |
| Petronas Chemicals vs. Hong Leong Bank | Petronas Chemicals vs. Alliance Financial Group | Petronas Chemicals vs. Uchi Technologies Bhd | Petronas Chemicals vs. Senheng New Retail |
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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.
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