Correlation Between Nestl SA and Mikron Holding
Can any of the company-specific risk be diversified away by investing in both Nestl SA and Mikron 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 Nestl SA and Mikron 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 Mikron Holding AG, you can compare the effects of market volatilities on Nestl SA and Mikron 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 Nestl SA with a short position of Mikron Holding. Check out your portfolio center. Please also check ongoing floating volatility patterns of Nestl SA and Mikron Holding.
Diversification Opportunities for Nestl SA and Mikron Holding
0.85 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Nestl and Mikron is 0.85. Overlapping area represents the amount of risk that can be diversified away by holding Nestl SA and Mikron Holding AG in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Mikron Holding AG 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 Mikron Holding. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Mikron Holding AG has no effect on the direction of Nestl SA i.e., Nestl SA and Mikron Holding go up and down completely randomly.
Pair Corralation between Nestl SA and Mikron Holding
Assuming the 90 days trading horizon Nestl SA is expected to under-perform the Mikron Holding. But the stock apears to be less risky and, when comparing its historical volatility, Nestl SA is 1.73 times less risky than Mikron Holding. The stock trades about -0.09 of its potential returns per unit of risk. The Mikron Holding AG is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest 1,253 in Mikron Holding AG on September 12, 2024 and sell it today you would earn a total of 112.00 from holding Mikron Holding AG or generate 8.94% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Nestl SA vs. Mikron Holding AG
Performance |
| Timeline |
| Nestl SA |
| Mikron Holding AG |
Nestl SA and Mikron Holding Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Nestl SA and Mikron Holding
The main advantage of trading using opposite Nestl SA and Mikron Holding positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Nestl SA position performs unexpectedly, Mikron 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 Mikron Holding will offset losses from the drop in Mikron Holding's long position.| Nestl SA vs. Novartis AG | Nestl SA vs. Roche Holding AG | Nestl SA vs. Zurich Insurance Group | Nestl SA vs. Swiss Re AG |
| Mikron Holding vs. Sulzer AG | Mikron Holding vs. Helvetia Holding AG | Mikron Holding vs. Swiss Life Holding | Mikron Holding vs. Adecco Group AG |
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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.
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