Correlation Between Singapore Telecommunicatio and Nestlé SA
Can any of the company-specific risk be diversified away by investing in both Singapore Telecommunicatio and Nestlé 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 Singapore Telecommunicatio and Nestlé SA into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Singapore Telecommunications Limited and Nestl SA, you can compare the effects of market volatilities on Singapore Telecommunicatio and Nestlé 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 Singapore Telecommunicatio with a short position of Nestlé SA. Check out your portfolio center. Please also check ongoing floating volatility patterns of Singapore Telecommunicatio and Nestlé SA.
Diversification Opportunities for Singapore Telecommunicatio and Nestlé SA
0.73 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Singapore and Nestlé is 0.73. Overlapping area represents the amount of risk that can be diversified away by holding Singapore Telecommunications L and Nestl SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nestlé SA and Singapore Telecommunicatio 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 Singapore Telecommunications Limited are associated (or correlated) with Nestlé SA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nestlé SA has no effect on the direction of Singapore Telecommunicatio i.e., Singapore Telecommunicatio and Nestlé SA go up and down completely randomly.
Pair Corralation between Singapore Telecommunicatio and Nestlé SA
Assuming the 90 days trading horizon Singapore Telecommunicatio is expected to generate 1.71 times less return on investment than Nestlé SA. But when comparing it to its historical volatility, Singapore Telecommunications Limited is 1.0 times less risky than Nestlé SA. It trades about 0.18 of its potential returns per unit of risk. Nestl SA is currently generating about 0.31 of returns per unit of risk over similar time horizon. If you would invest 8,280 in Nestl SA on November 28, 2024 and sell it today you would earn a total of 1,060 from holding Nestl SA or generate 12.8% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Singapore Telecommunications L vs. Nestl SA
Performance |
| Timeline |
| Singapore Telecommunicatio |
| Nestlé SA |
Singapore Telecommunicatio and Nestlé SA Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Singapore Telecommunicatio and Nestlé SA
The main advantage of trading using opposite Singapore Telecommunicatio and Nestlé SA positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Singapore Telecommunicatio position performs unexpectedly, Nestlé 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 Nestlé SA will offset losses from the drop in Nestlé SA's long position.The idea behind Singapore Telecommunications Limited and Nestl SA pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.
| Nestlé SA vs. Strategic Education | Nestlé SA vs. CHINA EDUCATION GROUP | Nestlé SA vs. Adtalem Global Education | Nestlé SA vs. Zoom Video Communications |
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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.
Other Complementary Tools
| Equity Analysis Research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities | |
| Companies Directory Evaluate performance of over 100,000 Stocks, Funds, and ETFs against different fundamentals | |
| Instant Ratings Determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance | |
| Performance Analysis Check effects of mean-variance optimization against your current asset allocation | |
| Portfolio Comparator Compare the composition, asset allocations and performance of any two portfolios in your account |