Correlation Between Nestl SA and Cal-Maine Foods
Can any of the company-specific risk be diversified away by investing in both Nestl SA and Cal-Maine 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 Cal-Maine 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 Cal Maine Foods, you can compare the effects of market volatilities on Nestl SA and Cal-Maine 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 Cal-Maine Foods. Check out your portfolio center. Please also check ongoing floating volatility patterns of Nestl SA and Cal-Maine Foods.
Diversification Opportunities for Nestl SA and Cal-Maine Foods
-0.82 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between Nestl and Cal-Maine is -0.82. Overlapping area represents the amount of risk that can be diversified away by holding Nestl SA and Cal Maine Foods in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cal Maine Foods 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 Cal-Maine Foods. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cal Maine Foods has no effect on the direction of Nestl SA i.e., Nestl SA and Cal-Maine Foods go up and down completely randomly.
Pair Corralation between Nestl SA and Cal-Maine Foods
Assuming the 90 days trading horizon Nestl SA is expected to under-perform the Cal-Maine Foods. But the stock apears to be less risky and, when comparing its historical volatility, Nestl SA is 1.84 times less risky than Cal-Maine Foods. The stock trades about -0.07 of its potential returns per unit of risk. The Cal Maine Foods is currently generating about 0.21 of returns per unit of risk over similar time horizon. If you would invest 6,109 in Cal Maine Foods on November 3, 2024 and sell it today you would earn a total of 4,621 from holding Cal Maine Foods or generate 75.64% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Nestl SA vs. Cal Maine Foods
Performance |
| Timeline |
| Nestl SA |
| Cal Maine Foods |
Nestl SA and Cal-Maine Foods Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Nestl SA and Cal-Maine Foods
The main advantage of trading using opposite Nestl SA and Cal-Maine Foods positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Nestl SA position performs unexpectedly, Cal-Maine 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 Cal-Maine Foods will offset losses from the drop in Cal-Maine Foods' long position.| Nestl SA vs. FORWARD AIR P | Nestl SA vs. Fair Isaac Corp | Nestl SA vs. NORWEGIAN AIR SHUT | Nestl SA vs. LAir Liquide SA |
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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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.
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