Correlation Between Nestle SA and Lamb Weston
Can any of the company-specific risk be diversified away by investing in both Nestle SA and Lamb Weston 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 Lamb Weston into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Nestle SA and Lamb Weston Holdings, you can compare the effects of market volatilities on Nestle SA and Lamb Weston 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 Lamb Weston. Check out your portfolio center. Please also check ongoing floating volatility patterns of Nestle SA and Lamb Weston.
Diversification Opportunities for Nestle SA and Lamb Weston
-0.82 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between Nestle and Lamb is -0.82. Overlapping area represents the amount of risk that can be diversified away by holding Nestle SA and Lamb Weston Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lamb Weston Holdings 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 Lamb Weston. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lamb Weston Holdings has no effect on the direction of Nestle SA i.e., Nestle SA and Lamb Weston go up and down completely randomly.
Pair Corralation between Nestle SA and Lamb Weston
Assuming the 90 days horizon Nestle SA is expected to under-perform the Lamb Weston. But the pink sheet apears to be less risky and, when comparing its historical volatility, Nestle SA is 1.62 times less risky than Lamb Weston. The pink sheet trades about -0.39 of its potential returns per unit of risk. The Lamb Weston Holdings is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest 7,746 in Lamb Weston Holdings on September 4, 2024 and sell it today you would earn a total of 88.00 from holding Lamb Weston Holdings or generate 1.14% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Nestle SA vs. Lamb Weston Holdings
Performance |
| Timeline |
| Nestle SA |
| Lamb Weston Holdings |
Nestle SA and Lamb Weston Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Nestle SA and Lamb Weston
The main advantage of trading using opposite Nestle SA and Lamb Weston positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Nestle SA position performs unexpectedly, Lamb Weston 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 Lamb Weston will offset losses from the drop in Lamb Weston's long position.| Nestle SA vs. General Mills | Nestle SA vs. Kellanova | Nestle SA vs. Campbell Soup | Nestle SA vs. Kraft Heinz Co |
| Lamb Weston vs. Allegion PLC | Lamb Weston vs. Evergy, | Lamb Weston vs. Fortive Corp | Lamb Weston vs. IQVIA 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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..
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