Correlation Between Nestle SA and General Mills
Can any of the company-specific risk be diversified away by investing in both Nestle SA and General Mills 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 General Mills into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Nestle SA ADR and General Mills, you can compare the effects of market volatilities on Nestle SA and General Mills 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 General Mills. Check out your portfolio center. Please also check ongoing floating volatility patterns of Nestle SA and General Mills.
Diversification Opportunities for Nestle SA and General Mills
-0.1 | Correlation Coefficient |
Good diversification
The 3 months correlation between Nestle and General is -0.1. Overlapping area represents the amount of risk that can be diversified away by holding Nestle SA ADR and General Mills in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on General Mills 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 ADR are associated (or correlated) with General Mills. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of General Mills has no effect on the direction of Nestle SA i.e., Nestle SA and General Mills go up and down completely randomly.
Pair Corralation between Nestle SA and General Mills
Assuming the 90 days horizon Nestle SA ADR is expected to generate 1.06 times more return on investment than General Mills. However, Nestle SA is 1.06 times more volatile than General Mills. It trades about 0.31 of its potential returns per unit of risk. General Mills is currently generating about -0.09 per unit of risk. If you would invest 8,647 in Nestle SA ADR on November 28, 2024 and sell it today you would earn a total of 1,118 from holding Nestle SA ADR or generate 12.93% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Nestle SA ADR vs. General Mills
Performance |
| Timeline |
| Nestle SA ADR |
| General Mills |
Nestle SA and General Mills Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Nestle SA and General Mills
The main advantage of trading using opposite Nestle SA and General Mills positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Nestle SA position performs unexpectedly, General Mills 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 General Mills will offset losses from the drop in General Mills' long position.| Nestle SA vs. Kellanova | Nestle SA vs. Campbell Soup | Nestle SA vs. ConAgra Foods | Nestle SA vs. Hormel Foods |
| General Mills vs. Campbell Soup | General Mills vs. Kraft Heinz Co | General Mills vs. ConAgra Foods | General Mills vs. Hormel Foods |
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 Portfolio Dashboard module to portfolio dashboard that provides centralized access to all your investments.
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