Correlation Between Nestle SA and Grupo Bimbo
Can any of the company-specific risk be diversified away by investing in both Nestle SA and Grupo Bimbo 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 Grupo Bimbo into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Nestle SA and Grupo Bimbo SAB, you can compare the effects of market volatilities on Nestle SA and Grupo Bimbo 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 Grupo Bimbo. Check out your portfolio center. Please also check ongoing floating volatility patterns of Nestle SA and Grupo Bimbo.
Diversification Opportunities for Nestle SA and Grupo Bimbo
0.72 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Nestle and Grupo is 0.72. Overlapping area represents the amount of risk that can be diversified away by holding Nestle SA and Grupo Bimbo SAB in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Grupo Bimbo SAB 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 Grupo Bimbo. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Grupo Bimbo SAB has no effect on the direction of Nestle SA i.e., Nestle SA and Grupo Bimbo go up and down completely randomly.
Pair Corralation between Nestle SA and Grupo Bimbo
Assuming the 90 days horizon Nestle SA is expected to under-perform the Grupo Bimbo. But the pink sheet apears to be less risky and, when comparing its historical volatility, Nestle SA is 3.49 times less risky than Grupo Bimbo. The pink sheet trades about -0.55 of its potential returns per unit of risk. The Grupo Bimbo SAB is currently generating about -0.13 of returns per unit of risk over similar time horizon. If you would invest 1,295 in Grupo Bimbo SAB on August 29, 2024 and sell it today you would lose (147.00) from holding Grupo Bimbo SAB or give up 11.35% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Nestle SA vs. Grupo Bimbo SAB
Performance |
| Timeline |
| Nestle SA |
| Grupo Bimbo SAB |
Nestle SA and Grupo Bimbo Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Nestle SA and Grupo Bimbo
The main advantage of trading using opposite Nestle SA and Grupo Bimbo positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Nestle SA position performs unexpectedly, Grupo Bimbo 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 Grupo Bimbo will offset losses from the drop in Grupo Bimbo'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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.
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