Correlation Between Nestle SA and BAB
Can any of the company-specific risk be diversified away by investing in both Nestle SA and BAB 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 Nestle SA and BAB into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Nestle SA and BAB Inc, you can compare the effects of market volatilities on Nestle SA and BAB 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 Nestle SA with a short position of BAB. Check out your portfolio center. Please also check ongoing floating volatility patterns of Nestle SA and BAB.
Diversification Opportunities for Nestle SA and BAB
Excellent diversification
The 3 months correlation between Nestle and BAB is -0.61. Overlapping area represents the amount of risk that can be diversified away by holding Nestle SA and BAB Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BAB Inc and Nestle 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 Nestle SA are associated (or correlated) with BAB. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BAB Inc has no effect on the direction of Nestle SA i.e., Nestle SA and BAB go up and down completely randomly.
Pair Corralation between Nestle SA and BAB
Assuming the 90 days horizon Nestle SA is expected to under-perform the BAB. But the pink sheet apears to be less risky and, when comparing its historical volatility, Nestle SA is 2.48 times less risky than BAB. The pink sheet trades about -0.13 of its potential returns per unit of risk. The BAB Inc is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest 75.00 in BAB Inc on September 2, 2024 and sell it today you would earn a total of 5.00 from holding BAB Inc or generate 6.67% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Nestle SA vs. BAB Inc
Performance |
| Timeline |
| Nestle SA |
| BAB Inc |
Nestle SA and BAB Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Nestle SA and BAB
The main advantage of trading using opposite Nestle SA and BAB positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Nestle SA position performs unexpectedly, BAB 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 BAB will offset losses from the drop in BAB's long position.| Nestle SA vs. General Mills | Nestle SA vs. Kellanova | Nestle SA vs. Campbell Soup | Nestle SA vs. Kraft Heinz Co |
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 Pattern Recognition module to use different Pattern Recognition models to time the market across multiple global exchanges.
Other Complementary Tools
| Fundamental Analysis View fundamental data based on most recent published financial statements | |
| Price Exposure Probability Analyze equity upside and downside potential for a given time horizon across multiple markets | |
| Companies Directory Evaluate performance of over 100,000 Stocks, Funds, and ETFs against different fundamentals | |
| Performance Analysis Check effects of mean-variance optimization against your current asset allocation | |
| Portfolio File Import Quickly import all of your third-party portfolios from your local drive in csv format |