Correlation Between Nestle SA and Cult Food
Can any of the company-specific risk be diversified away by investing in both Nestle SA and Cult Food 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 Cult Food into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Nestle SA and Cult Food Science, you can compare the effects of market volatilities on Nestle SA and Cult Food 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 Cult Food. Check out your portfolio center. Please also check ongoing floating volatility patterns of Nestle SA and Cult Food.
Diversification Opportunities for Nestle SA and Cult Food
Poor diversification
The 3 months correlation between Nestle and Cult is 0.77. Overlapping area represents the amount of risk that can be diversified away by holding Nestle SA and Cult Food Science in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cult Food Science 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 Cult Food. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cult Food Science has no effect on the direction of Nestle SA i.e., Nestle SA and Cult Food go up and down completely randomly.
Pair Corralation between Nestle SA and Cult Food
Assuming the 90 days horizon Nestle SA is expected to under-perform the Cult Food. But the pink sheet apears to be less risky and, when comparing its historical volatility, Nestle SA is 6.19 times less risky than Cult Food. The pink sheet trades about -0.4 of its potential returns per unit of risk. The Cult Food Science is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest 3.69 in Cult Food Science on August 31, 2024 and sell it today you would lose (0.04) from holding Cult Food Science or give up 1.08% 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. Cult Food Science
Performance |
| Timeline |
| Nestle SA |
| Cult Food Science |
Nestle SA and Cult Food Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Nestle SA and Cult Food
The main advantage of trading using opposite Nestle SA and Cult Food positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Nestle SA position performs unexpectedly, Cult Food 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 Cult Food will offset losses from the drop in Cult Food's long position.| Nestle SA vs. General Mills | Nestle SA vs. Kellanova | Nestle SA vs. Campbell Soup | Nestle SA vs. Kraft Heinz Co |
| Cult Food vs. Branded Legacy | Cult Food vs. BAB Inc | Cult Food vs. Bioharvest Sciences | Cult Food vs. Else Nutrition Holdings |
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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.
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