Correlation Between Nestlé SA and Yihai International
Can any of the company-specific risk be diversified away by investing in both Nestlé SA and Yihai International 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 Yihai International into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Nestl SA and Yihai International Holding, you can compare the effects of market volatilities on Nestlé SA and Yihai International 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 Yihai International. Check out your portfolio center. Please also check ongoing floating volatility patterns of Nestlé SA and Yihai International.
Diversification Opportunities for Nestlé SA and Yihai International
-0.3 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Nestlé and Yihai is -0.3. Overlapping area represents the amount of risk that can be diversified away by holding Nestl SA and Yihai International Holding in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Yihai International 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 Yihai International. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Yihai International has no effect on the direction of Nestlé SA i.e., Nestlé SA and Yihai International go up and down completely randomly.
Pair Corralation between Nestlé SA and Yihai International
Assuming the 90 days trading horizon Nestl SA is expected to under-perform the Yihai International. But the stock apears to be less risky and, when comparing its historical volatility, Nestl SA is 4.44 times less risky than Yihai International. The stock trades about -0.03 of its potential returns per unit of risk. The Yihai International Holding is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest 112.00 in Yihai International Holding on September 13, 2024 and sell it today you would earn a total of 66.00 from holding Yihai International Holding or generate 58.93% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 99.8% |
| Values | Daily Returns |
Nestl SA vs. Yihai International Holding
Performance |
| Timeline |
| Nestlé SA |
| Yihai International |
Nestlé SA and Yihai International Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Nestlé SA and Yihai International
The main advantage of trading using opposite Nestlé SA and Yihai International positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Nestlé SA position performs unexpectedly, Yihai International 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 Yihai International will offset losses from the drop in Yihai International's long position.| Nestlé SA vs. Hormel Foods | Nestlé SA vs. Superior Plus Corp | Nestlé SA vs. SIVERS SEMICONDUCTORS AB | Nestlé SA vs. NorAm Drilling AS |
| Yihai International vs. Meli Hotels International | Yihai International vs. Aegean Airlines SA | Yihai International vs. Southwest Airlines Co | Yihai International vs. NH HOTEL GROUP |
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 ETF Categories module to list of ETF categories grouped based on various criteria, such as the investment strategy or type of investments.
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