Correlation Between Nestl SA and UBS Group
Can any of the company-specific risk be diversified away by investing in both Nestl SA and UBS Group 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 UBS Group into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Nestl SA and UBS Group AG, you can compare the effects of market volatilities on Nestl SA and UBS Group 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 UBS Group. Check out your portfolio center. Please also check ongoing floating volatility patterns of Nestl SA and UBS Group.
Diversification Opportunities for Nestl SA and UBS Group
Excellent diversification
The 3 months correlation between Nestl and UBS is -0.67. Overlapping area represents the amount of risk that can be diversified away by holding Nestl SA and UBS Group AG in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on UBS Group 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 UBS Group. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of UBS Group AG has no effect on the direction of Nestl SA i.e., Nestl SA and UBS Group go up and down completely randomly.
Pair Corralation between Nestl SA and UBS Group
Assuming the 90 days trading horizon Nestl SA is expected to under-perform the UBS Group. But the stock apears to be less risky and, when comparing its historical volatility, Nestl SA is 1.76 times less risky than UBS Group. The stock trades about -0.06 of its potential returns per unit of risk. The UBS Group AG is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest 1,688 in UBS Group AG on August 27, 2024 and sell it today you would earn a total of 1,142 from holding UBS Group AG or generate 67.65% 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. UBS Group AG
Performance |
| Timeline |
| Nestl SA |
| UBS Group AG |
Nestl SA and UBS Group Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Nestl SA and UBS Group
The main advantage of trading using opposite Nestl SA and UBS Group positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Nestl SA position performs unexpectedly, UBS Group 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 UBS Group will offset losses from the drop in UBS Group'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 |
| UBS Group vs. Zurich Insurance Group | UBS Group vs. Novartis AG | UBS Group vs. Swiss Re AG | UBS Group vs. ABB |
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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.
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