Correlation Between General Mills and Nestl SA
Can any of the company-specific risk be diversified away by investing in both General Mills 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 General Mills and Nestl SA into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between General Mills and Nestl SA, you can compare the effects of market volatilities on General Mills 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 General Mills with a short position of Nestl SA. Check out your portfolio center. Please also check ongoing floating volatility patterns of General Mills and Nestl SA.
Diversification Opportunities for General Mills and Nestl SA
0.77 | Correlation Coefficient |
Poor diversification
The 3 months correlation between General and Nestl is 0.77. Overlapping area represents the amount of risk that can be diversified away by holding General Mills and Nestl SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nestl SA and General Mills 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 General Mills 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 General Mills i.e., General Mills and Nestl SA go up and down completely randomly.
Pair Corralation between General Mills and Nestl SA
Assuming the 90 days horizon General Mills is expected to generate 1.18 times more return on investment than Nestl SA. However, General Mills is 1.18 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 -0.2 per unit of risk. If you would invest 6,276 in General Mills on September 3, 2024 and sell it today you would earn a total of 34.00 from holding General Mills or generate 0.54% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
General Mills vs. Nestl SA
Performance |
| Timeline |
| General Mills |
| Nestl SA |
General Mills and Nestl SA Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with General Mills and Nestl SA
The main advantage of trading using opposite General Mills and Nestl SA positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if General Mills 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.| General Mills vs. Aedas Homes SA | General Mills vs. MI Homes | General Mills vs. DFS Furniture PLC | General Mills vs. Addus HomeCare |
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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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.
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