Correlation Between Lancaster Colony and Nestle SA
Can any of the company-specific risk be diversified away by investing in both Lancaster Colony and Nestle 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 Lancaster Colony and Nestle SA into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Lancaster Colony and Nestle SA, you can compare the effects of market volatilities on Lancaster Colony and Nestle 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 Lancaster Colony with a short position of Nestle SA. Check out your portfolio center. Please also check ongoing floating volatility patterns of Lancaster Colony and Nestle SA.
Diversification Opportunities for Lancaster Colony and Nestle SA
-0.7 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Lancaster and Nestle is -0.7. Overlapping area represents the amount of risk that can be diversified away by holding Lancaster Colony and Nestle SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nestle SA and Lancaster Colony 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 Lancaster Colony are associated (or correlated) with Nestle SA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nestle SA has no effect on the direction of Lancaster Colony i.e., Lancaster Colony and Nestle SA go up and down completely randomly.
Pair Corralation between Lancaster Colony and Nestle SA
Given the investment horizon of 90 days Lancaster Colony is expected to generate 1.29 times more return on investment than Nestle SA. However, Lancaster Colony is 1.29 times more volatile than Nestle SA. It trades about 0.01 of its potential returns per unit of risk. Nestle SA is currently generating about -0.03 per unit of risk. If you would invest 19,214 in Lancaster Colony on September 3, 2024 and sell it today you would lose (484.00) from holding Lancaster Colony or give up 2.52% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Lancaster Colony vs. Nestle SA
Performance |
| Timeline |
| Lancaster Colony |
| Nestle SA |
Lancaster Colony and Nestle SA Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Lancaster Colony and Nestle SA
The main advantage of trading using opposite Lancaster Colony and Nestle SA positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Lancaster Colony position performs unexpectedly, Nestle 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 Nestle SA will offset losses from the drop in Nestle SA's long position.| Lancaster Colony vs. Treehouse Foods | Lancaster Colony vs. John B Sanfilippo | Lancaster Colony vs. Seneca Foods Corp | Lancaster Colony vs. Seneca Foods Corp |
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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 Portfolio Center module to all portfolio management and optimization tools to improve performance of your portfolios.
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