Correlation Between Nestl SA and Ebro Foods
Can any of the company-specific risk be diversified away by investing in both Nestl SA and Ebro Foods 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 Nestl SA and Ebro Foods into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Nestl SA and Ebro Foods SA, you can compare the effects of market volatilities on Nestl SA and Ebro Foods 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 Nestl SA with a short position of Ebro Foods. Check out your portfolio center. Please also check ongoing floating volatility patterns of Nestl SA and Ebro Foods.
Diversification Opportunities for Nestl SA and Ebro Foods
-0.26 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Nestl and Ebro is -0.26. Overlapping area represents the amount of risk that can be diversified away by holding Nestl SA and Ebro Foods SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ebro Foods SA and Nestl SA 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 Nestl SA are associated (or correlated) with Ebro Foods. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ebro Foods SA has no effect on the direction of Nestl SA i.e., Nestl SA and Ebro Foods go up and down completely randomly.
Pair Corralation between Nestl SA and Ebro Foods
Assuming the 90 days trading horizon Nestl SA is expected to under-perform the Ebro Foods. In addition to that, Nestl SA is 1.22 times more volatile than Ebro Foods SA. It trades about -0.06 of its total potential returns per unit of risk. Ebro Foods SA is currently generating about 0.03 per unit of volatility. If you would invest 1,499 in Ebro Foods SA on September 4, 2024 and sell it today you would earn a total of 85.00 from holding Ebro Foods SA or generate 5.67% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Nestl SA vs. Ebro Foods SA
Performance |
| Timeline |
| Nestl SA |
| Ebro Foods SA |
Nestl SA and Ebro Foods Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Nestl SA and Ebro Foods
The main advantage of trading using opposite Nestl SA and Ebro Foods positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Nestl SA position performs unexpectedly, Ebro Foods 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 Ebro Foods will offset losses from the drop in Ebro Foods' long position.| Nestl SA vs. Richardson Electronics | Nestl SA vs. Arrow Electronics | Nestl SA vs. AOI Electronics Co | Nestl SA vs. Renesas Electronics |
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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.
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