Correlation Between Nestle Bhd and FARM FRESH
Can any of the company-specific risk be diversified away by investing in both Nestle Bhd and FARM FRESH 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 FARM FRESH into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Nestle Bhd and FARM FRESH BERHAD, you can compare the effects of market volatilities on Nestle Bhd and FARM FRESH 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 FARM FRESH. Check out your portfolio center. Please also check ongoing floating volatility patterns of Nestle Bhd and FARM FRESH.
Diversification Opportunities for Nestle Bhd and FARM FRESH
0.03 | Correlation Coefficient |
Significant diversification
The 3 months correlation between Nestle and FARM is 0.03. Overlapping area represents the amount of risk that can be diversified away by holding Nestle Bhd and FARM FRESH BERHAD in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on FARM FRESH BERHAD 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 FARM FRESH. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of FARM FRESH BERHAD has no effect on the direction of Nestle Bhd i.e., Nestle Bhd and FARM FRESH go up and down completely randomly.
Pair Corralation between Nestle Bhd and FARM FRESH
Assuming the 90 days trading horizon Nestle Bhd is expected to under-perform the FARM FRESH. But the stock apears to be less risky and, when comparing its historical volatility, Nestle Bhd is 1.15 times less risky than FARM FRESH. The stock trades about -0.09 of its potential returns per unit of risk. The FARM FRESH BERHAD is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest 178.00 in FARM FRESH BERHAD on October 26, 2024 and sell it today you would earn a total of 4.00 from holding FARM FRESH BERHAD or generate 2.25% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 97.67% |
| Values | Daily Returns |
Nestle Bhd vs. FARM FRESH BERHAD
Performance |
| Timeline |
| Nestle Bhd |
| FARM FRESH BERHAD |
Nestle Bhd and FARM FRESH Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Nestle Bhd and FARM FRESH
The main advantage of trading using opposite Nestle Bhd and FARM FRESH positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Nestle Bhd position performs unexpectedly, FARM FRESH 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 FARM FRESH will offset losses from the drop in FARM FRESH's long position.| Nestle Bhd vs. Mycron Steel Bhd | Nestle Bhd vs. Binasat Communications Bhd | Nestle Bhd vs. Southern Steel Bhd | Nestle Bhd vs. Cosmos Technology International |
| FARM FRESH vs. Nestle Bhd | FARM FRESH vs. PPB Group Bhd | FARM FRESH vs. IOI Bhd | FARM FRESH vs. FGV Holdings Bhd |
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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.
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