Correlation Between PIE Industrial and Nestle Bhd
Can any of the company-specific risk be diversified away by investing in both PIE Industrial 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 PIE Industrial and Nestle Bhd into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between PIE Industrial Bhd and Nestle Bhd, you can compare the effects of market volatilities on PIE Industrial 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 PIE Industrial with a short position of Nestle Bhd. Check out your portfolio center. Please also check ongoing floating volatility patterns of PIE Industrial and Nestle Bhd.
Diversification Opportunities for PIE Industrial and Nestle Bhd
-0.36 | Correlation Coefficient |
Very good diversification
The 3 months correlation between PIE and Nestle is -0.36. Overlapping area represents the amount of risk that can be diversified away by holding PIE Industrial Bhd and Nestle Bhd in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nestle Bhd and PIE Industrial 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 PIE Industrial Bhd 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 PIE Industrial i.e., PIE Industrial and Nestle Bhd go up and down completely randomly.
Pair Corralation between PIE Industrial and Nestle Bhd
Assuming the 90 days trading horizon PIE Industrial Bhd is expected to generate 2.58 times more return on investment than Nestle Bhd. However, PIE Industrial is 2.58 times more volatile than Nestle Bhd. It trades about 0.08 of its potential returns per unit of risk. Nestle Bhd is currently generating about -0.06 per unit of risk. If you would invest 258.00 in PIE Industrial Bhd on August 28, 2024 and sell it today you would earn a total of 330.00 from holding PIE Industrial Bhd or generate 127.91% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 99.79% |
| Values | Daily Returns |
PIE Industrial Bhd vs. Nestle Bhd
Performance |
| Timeline |
| PIE Industrial Bhd |
| Nestle Bhd |
PIE Industrial and Nestle Bhd Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with PIE Industrial and Nestle Bhd
The main advantage of trading using opposite PIE Industrial and Nestle Bhd positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if PIE Industrial 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.The idea behind PIE Industrial Bhd and Nestle Bhd pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.| Nestle Bhd vs. CSC Steel Holdings | Nestle Bhd vs. Senheng New Retail | Nestle Bhd vs. Diversified Gateway Solutions | Nestle Bhd vs. PIE Industrial 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 Portfolio Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.
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