Correlation Between Nestle SA and China Feihe
Can any of the company-specific risk be diversified away by investing in both Nestle SA and China Feihe 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 China Feihe into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Nestle SA and China Feihe Limited, you can compare the effects of market volatilities on Nestle SA and China Feihe 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 China Feihe. Check out your portfolio center. Please also check ongoing floating volatility patterns of Nestle SA and China Feihe.
Diversification Opportunities for Nestle SA and China Feihe
-0.68 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Nestle and China is -0.68. Overlapping area represents the amount of risk that can be diversified away by holding Nestle SA and China Feihe Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on China Feihe Limited 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 China Feihe. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of China Feihe Limited has no effect on the direction of Nestle SA i.e., Nestle SA and China Feihe go up and down completely randomly.
Pair Corralation between Nestle SA and China Feihe
Assuming the 90 days horizon Nestle SA is expected to under-perform the China Feihe. But the pink sheet apears to be less risky and, when comparing its historical volatility, Nestle SA is 5.45 times less risky than China Feihe. The pink sheet trades about -0.05 of its potential returns per unit of risk. The China Feihe Limited is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest 12.00 in China Feihe Limited on August 31, 2024 and sell it today you would earn a total of 58.00 from holding China Feihe Limited or generate 483.33% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 99.73% |
| Values | Daily Returns |
Nestle SA vs. China Feihe Limited
Performance |
| Timeline |
| Nestle SA |
| China Feihe Limited |
Nestle SA and China Feihe Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Nestle SA and China Feihe
The main advantage of trading using opposite Nestle SA and China Feihe positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Nestle SA position performs unexpectedly, China Feihe 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 China Feihe will offset losses from the drop in China Feihe's long position.| Nestle SA vs. General Mills | Nestle SA vs. Kellanova | Nestle SA vs. Campbell Soup | Nestle SA vs. Kraft Heinz Co |
| China Feihe vs. The A2 Milk | China Feihe vs. Altavoz Entertainment | China Feihe vs. Artisan Consumer Goods | China Feihe vs. General Mills |
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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.
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