Correlation Between J+J SNACK and Nestlé SA
Can any of the company-specific risk be diversified away by investing in both J+J SNACK 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 J+J SNACK and Nestlé SA into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between JJ SNACK FOODS and Nestl SA, you can compare the effects of market volatilities on J+J SNACK 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 J+J SNACK with a short position of Nestlé SA. Check out your portfolio center. Please also check ongoing floating volatility patterns of J+J SNACK and Nestlé SA.
Diversification Opportunities for J+J SNACK and Nestlé SA
Pay attention - limited upside
The 3 months correlation between J+J and Nestlé is -0.86. Overlapping area represents the amount of risk that can be diversified away by holding JJ SNACK FOODS and Nestl SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nestlé SA and J+J SNACK 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 JJ SNACK FOODS 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 J+J SNACK i.e., J+J SNACK and Nestlé SA go up and down completely randomly.
Pair Corralation between J+J SNACK and Nestlé SA
Assuming the 90 days trading horizon JJ SNACK FOODS is expected to generate 0.68 times more return on investment than Nestlé SA. However, JJ SNACK FOODS is 1.47 times less risky than Nestlé SA. It trades about -0.04 of its potential returns per unit of risk. Nestl SA is currently generating about -0.18 per unit of risk. If you would invest 16,300 in JJ SNACK FOODS on September 12, 2024 and sell it today you would lose (100.00) from holding JJ SNACK FOODS or give up 0.61% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
JJ SNACK FOODS vs. Nestl SA
Performance |
| Timeline |
| JJ SNACK FOODS |
| Nestlé SA |
J+J SNACK and Nestlé SA Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with J+J SNACK and Nestlé SA
The main advantage of trading using opposite J+J SNACK and Nestlé SA positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if J+J SNACK 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.| J+J SNACK vs. Hormel Foods | J+J SNACK vs. Superior Plus Corp | J+J SNACK vs. SIVERS SEMICONDUCTORS AB | J+J SNACK vs. NorAm Drilling AS |
| Nestlé SA vs. Plastic Omnium | Nestlé SA vs. CDL INVESTMENT | Nestlé SA vs. New Residential Investment | Nestlé SA vs. Compagnie Plastic Omnium |
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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.
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