Correlation Between Automatic Data and Nestl SA
Can any of the company-specific risk be diversified away by investing in both Automatic Data and Nestl SA 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 Automatic Data and Nestl SA into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Automatic Data Processing and Nestl SA, you can compare the effects of market volatilities on Automatic Data and Nestl SA 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 Automatic Data with a short position of Nestl SA. Check out your portfolio center. Please also check ongoing floating volatility patterns of Automatic Data and Nestl SA.
Diversification Opportunities for Automatic Data and Nestl SA
-0.22 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Automatic and Nestl is -0.22. Overlapping area represents the amount of risk that can be diversified away by holding Automatic Data Processing and Nestl SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nestl SA and Automatic Data 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 Automatic Data Processing are associated (or correlated) with Nestl SA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nestl SA has no effect on the direction of Automatic Data i.e., Automatic Data and Nestl SA go up and down completely randomly.
Pair Corralation between Automatic Data and Nestl SA
Assuming the 90 days horizon Automatic Data is expected to generate 1.52 times less return on investment than Nestl SA. But when comparing it to its historical volatility, Automatic Data Processing is 1.11 times less risky than Nestl SA. It trades about 0.13 of its potential returns per unit of risk. Nestl SA is currently generating about 0.17 of returns per unit of risk over similar time horizon. If you would invest 7,840 in Nestl SA on November 6, 2024 and sell it today you would earn a total of 440.00 from holding Nestl SA or generate 5.61% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Automatic Data Processing vs. Nestl SA
Performance |
| Timeline |
| Automatic Data Processing |
| Nestl SA |
Automatic Data and Nestl SA Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Automatic Data and Nestl SA
The main advantage of trading using opposite Automatic Data and Nestl SA positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Automatic Data position performs unexpectedly, Nestl SA 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 Nestl SA will offset losses from the drop in Nestl SA's long position.| Automatic Data vs. Goosehead Insurance | Automatic Data vs. INSURANCE AUST GRP | Automatic Data vs. Insurance Australia Group | Automatic Data vs. Siamgas And Petrochemicals |
| Nestl SA vs. Corsair Gaming | Nestl SA vs. Nippon Steel | Nestl SA vs. LAir Liquide SA | Nestl SA vs. Ryanair Holdings plc |
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 File Import module to quickly import all of your third-party portfolios from your local drive in csv format.
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