Correlation Between Nestle Bhd and Southern Steel
Can any of the company-specific risk be diversified away by investing in both Nestle Bhd and Southern Steel 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 Southern Steel into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Nestle Bhd and Southern Steel Bhd, you can compare the effects of market volatilities on Nestle Bhd and Southern Steel 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 Southern Steel. Check out your portfolio center. Please also check ongoing floating volatility patterns of Nestle Bhd and Southern Steel.
Diversification Opportunities for Nestle Bhd and Southern Steel
-0.01 | Correlation Coefficient |
Good diversification
The 3 months correlation between Nestle and Southern is -0.01. Overlapping area represents the amount of risk that can be diversified away by holding Nestle Bhd and Southern Steel Bhd in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Southern Steel Bhd 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 Southern Steel. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Southern Steel Bhd has no effect on the direction of Nestle Bhd i.e., Nestle Bhd and Southern Steel go up and down completely randomly.
Pair Corralation between Nestle Bhd and Southern Steel
Assuming the 90 days trading horizon Nestle Bhd is expected to under-perform the Southern Steel. But the stock apears to be less risky and, when comparing its historical volatility, Nestle Bhd is 2.25 times less risky than Southern Steel. The stock trades about -0.69 of its potential returns per unit of risk. The Southern Steel Bhd is currently generating about -0.05 of returns per unit of risk over similar time horizon. If you would invest 52.00 in Southern Steel Bhd on November 3, 2024 and sell it today you would lose (1.00) from holding Southern Steel Bhd or give up 1.92% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Nestle Bhd vs. Southern Steel Bhd
Performance |
| Timeline |
| Nestle Bhd |
| Southern Steel Bhd |
Nestle Bhd and Southern Steel Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Nestle Bhd and Southern Steel
The main advantage of trading using opposite Nestle Bhd and Southern Steel positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Nestle Bhd position performs unexpectedly, Southern Steel 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 Southern Steel will offset losses from the drop in Southern Steel's long position.| Nestle Bhd vs. Binasat Communications Bhd | Nestle Bhd vs. ES Ceramics Technology | Nestle Bhd vs. Globetronics Tech Bhd | Nestle Bhd vs. SFP Tech Holdings |
| Southern Steel vs. Farm Price Holdings | Southern Steel vs. Petronas Chemicals Group | Southern Steel vs. Press Metal Bhd | Southern Steel vs. FARM FRESH BERHAD |
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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.
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