Correlation Between Nestl SA and Dow Jones
Can any of the company-specific risk be diversified away by investing in both Nestl SA and Dow Jones 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 Dow Jones into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Nestl SA and Dow Jones Industrial, you can compare the effects of market volatilities on Nestl SA and Dow Jones 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 Dow Jones. Check out your portfolio center. Please also check ongoing floating volatility patterns of Nestl SA and Dow Jones.
Diversification Opportunities for Nestl SA and Dow Jones
Pay attention - limited upside
The 3 months correlation between Nestl and Dow is -0.84. Overlapping area represents the amount of risk that can be diversified away by holding Nestl SA and Dow Jones Industrial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dow Jones Industrial 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 Dow Jones. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dow Jones Industrial has no effect on the direction of Nestl SA i.e., Nestl SA and Dow Jones go up and down completely randomly.
Pair Corralation between Nestl SA and Dow Jones
Assuming the 90 days trading horizon Nestl SA is expected to under-perform the Dow Jones. In addition to that, Nestl SA is 1.23 times more volatile than Dow Jones Industrial. It trades about -0.21 of its total potential returns per unit of risk. Dow Jones Industrial is currently generating about 0.37 per unit of volatility. If you would invest 4,179,460 in Dow Jones Industrial on September 5, 2024 and sell it today you would earn a total of 321,944 from holding Dow Jones Industrial or generate 7.7% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Significant |
| Accuracy | 95.65% |
| Values | Daily Returns |
Nestl SA vs. Dow Jones Industrial
Performance |
| Timeline |
Nestl SA and Dow Jones Volatility Contrast
Predicted Return Density |
| Returns |
Nestl SA
Pair trading matchups for Nestl SA
Dow Jones Industrial
Pair trading matchups for Dow Jones
Pair Trading with Nestl SA and Dow Jones
The main advantage of trading using opposite Nestl SA and Dow Jones positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Nestl SA position performs unexpectedly, Dow Jones 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 Dow Jones will offset losses from the drop in Dow Jones' long position.| Nestl SA vs. Vastned Retail NV | Nestl SA vs. REMEDY ENTERTAINMENT OYJ | Nestl SA vs. Retail Estates NV | Nestl SA vs. ULTRA CLEAN HLDGS |
| Dow Jones vs. Shake Shack | Dow Jones vs. Artisan Partners Asset | Dow Jones vs. Dave Busters Entertainment | Dow Jones vs. Meli Hotels International |
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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