Correlation Between Platinum Investment and Nestl SA
Can any of the company-specific risk be diversified away by investing in both Platinum Investment and Nestl SA 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 Platinum Investment and Nestl SA into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Platinum Investment Management and Nestl SA, you can compare the effects of market volatilities on Platinum Investment and Nestl SA 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 Platinum Investment with a short position of Nestl SA. Check out your portfolio center. Please also check ongoing floating volatility patterns of Platinum Investment and Nestl SA.
Diversification Opportunities for Platinum Investment and Nestl SA
0.68 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Platinum and Nestl is 0.68. Overlapping area represents the amount of risk that can be diversified away by holding Platinum Investment Management and Nestl SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nestl SA and Platinum Investment 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 Platinum Investment Management are associated (or correlated) with Nestl SA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nestl SA has no effect on the direction of Platinum Investment i.e., Platinum Investment and Nestl SA go up and down completely randomly.
Pair Corralation between Platinum Investment and Nestl SA
Assuming the 90 days horizon Platinum Investment Management is expected to generate 2.8 times more return on investment than Nestl SA. However, Platinum Investment is 2.8 times more volatile than Nestl SA. It trades about 0.06 of its potential returns per unit of risk. Nestl SA is currently generating about -0.07 per unit of risk. If you would invest 34.00 in Platinum Investment Management on November 3, 2024 and sell it today you would earn a total of 7.00 from holding Platinum Investment Management or generate 20.59% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Platinum Investment Management vs. Nestl SA
Performance |
| Timeline |
| Platinum Investment |
| Nestl SA |
Platinum Investment and Nestl SA Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Platinum Investment and Nestl SA
The main advantage of trading using opposite Platinum Investment and Nestl SA positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Platinum Investment position performs unexpectedly, Nestl SA 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 Nestl SA will offset losses from the drop in Nestl SA's long position.| Platinum Investment vs. Scottish Mortgage Investment | Platinum Investment vs. Virtus Investment Partners | Platinum Investment vs. Harmony Gold Mining | Platinum Investment vs. Keck Seng Investments |
| Nestl SA vs. FORWARD AIR P | Nestl SA vs. Fair Isaac Corp | Nestl SA vs. NORWEGIAN AIR SHUT | Nestl SA vs. LAir Liquide SA |
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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.
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