Correlation Between PTT Global and Nestlé SA
Can any of the company-specific risk be diversified away by investing in both PTT Global and Nestlé 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 PTT Global and Nestlé SA into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between PTT Global Chemical and Nestl SA, you can compare the effects of market volatilities on PTT Global and Nestlé 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 PTT Global with a short position of Nestlé SA. Check out your portfolio center. Please also check ongoing floating volatility patterns of PTT Global and Nestlé SA.
Diversification Opportunities for PTT Global and Nestlé SA
0.55 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between PTT and Nestlé is 0.55. Overlapping area represents the amount of risk that can be diversified away by holding PTT Global Chemical and Nestl SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nestlé SA and PTT Global 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 PTT Global Chemical are associated (or correlated) with Nestlé SA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nestlé SA has no effect on the direction of PTT Global i.e., PTT Global and Nestlé SA go up and down completely randomly.
Pair Corralation between PTT Global and Nestlé SA
Assuming the 90 days trading horizon PTT Global Chemical is expected to generate 2.23 times more return on investment than Nestlé SA. However, PTT Global is 2.23 times more volatile than Nestl SA. It trades about -0.03 of its potential returns per unit of risk. Nestl SA is currently generating about -0.22 per unit of risk. If you would invest 63.00 in PTT Global Chemical on September 19, 2024 and sell it today you would lose (1.00) from holding PTT Global Chemical or give up 1.59% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 95.65% |
| Values | Daily Returns |
PTT Global Chemical vs. Nestl SA
Performance |
| Timeline |
| PTT Global Chemical |
| Nestlé SA |
PTT Global and Nestlé SA Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with PTT Global and Nestlé SA
The main advantage of trading using opposite PTT Global and Nestlé SA positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if PTT Global position performs unexpectedly, Nestlé 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 Nestlé SA will offset losses from the drop in Nestlé SA's long position.The idea behind PTT Global Chemical and Nestl SA 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.| Nestlé SA vs. Superior Plus Corp | Nestlé SA vs. SIVERS SEMICONDUCTORS AB | Nestlé SA vs. NorAm Drilling AS | Nestlé SA vs. Norsk Hydro ASA |
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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..
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