Correlation Between Nestlé SA and Coffee Holding
Can any of the company-specific risk be diversified away by investing in both Nestlé SA and Coffee Holding 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 Nestlé SA and Coffee Holding into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Nestl SA and Coffee Holding Co, you can compare the effects of market volatilities on Nestlé SA and Coffee Holding 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 Nestlé SA with a short position of Coffee Holding. Check out your portfolio center. Please also check ongoing floating volatility patterns of Nestlé SA and Coffee Holding.
Diversification Opportunities for Nestlé SA and Coffee Holding
-0.72 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between Nestlé and Coffee is -0.72. Overlapping area represents the amount of risk that can be diversified away by holding Nestl SA and Coffee Holding Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Coffee Holding and Nestlé 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 Coffee Holding. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Coffee Holding has no effect on the direction of Nestlé SA i.e., Nestlé SA and Coffee Holding go up and down completely randomly.
Pair Corralation between Nestlé SA and Coffee Holding
Assuming the 90 days trading horizon Nestl SA is expected to under-perform the Coffee Holding. But the stock apears to be less risky and, when comparing its historical volatility, Nestl SA is 5.38 times less risky than Coffee Holding. The stock trades about -0.05 of its potential returns per unit of risk. The Coffee Holding Co is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest 151.00 in Coffee Holding Co on October 14, 2024 and sell it today you would earn a total of 201.00 from holding Coffee Holding Co or generate 133.11% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Nestl SA vs. Coffee Holding Co
Performance |
| Timeline |
| Nestlé SA |
| Coffee Holding |
Nestlé SA and Coffee Holding Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Nestlé SA and Coffee Holding
The main advantage of trading using opposite Nestlé SA and Coffee Holding positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Nestlé SA position performs unexpectedly, Coffee Holding 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 Coffee Holding will offset losses from the drop in Coffee Holding's long position.| Nestlé SA vs. De Grey Mining | Nestlé SA vs. FAST RETAIL ADR | Nestlé SA vs. GALENA MINING LTD | Nestlé SA vs. RETAIL FOOD GROUP |
| Coffee Holding vs. Gaztransport Technigaz SA | Coffee Holding vs. Iridium Communications | Coffee Holding vs. MOBILE FACTORY INC | Coffee Holding vs. Zoom Video Communications |
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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.
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