Correlation Between WILLIS LEASE and Nestl SA
Can any of the company-specific risk be diversified away by investing in both WILLIS LEASE 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 WILLIS LEASE and Nestl SA into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between WILLIS LEASE FIN and Nestl SA, you can compare the effects of market volatilities on WILLIS LEASE 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 WILLIS LEASE with a short position of Nestl SA. Check out your portfolio center. Please also check ongoing floating volatility patterns of WILLIS LEASE and Nestl SA.
Diversification Opportunities for WILLIS LEASE and Nestl SA
-0.8 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between WILLIS and Nestl is -0.8. Overlapping area represents the amount of risk that can be diversified away by holding WILLIS LEASE FIN and Nestl SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nestl SA and WILLIS LEASE 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 WILLIS LEASE FIN 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 WILLIS LEASE i.e., WILLIS LEASE and Nestl SA go up and down completely randomly.
Pair Corralation between WILLIS LEASE and Nestl SA
Assuming the 90 days horizon WILLIS LEASE FIN is expected to generate 2.55 times more return on investment than Nestl SA. However, WILLIS LEASE is 2.55 times more volatile than Nestl SA. It trades about 0.16 of its potential returns per unit of risk. Nestl SA is currently generating about -0.05 per unit of risk. If you would invest 3,742 in WILLIS LEASE FIN on September 4, 2024 and sell it today you would earn a total of 15,858 from holding WILLIS LEASE FIN or generate 423.78% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
WILLIS LEASE FIN vs. Nestl SA
Performance |
| Timeline |
| WILLIS LEASE FIN |
| Nestl SA |
WILLIS LEASE and Nestl SA Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with WILLIS LEASE and Nestl SA
The main advantage of trading using opposite WILLIS LEASE and Nestl SA positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if WILLIS LEASE 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.The idea behind WILLIS LEASE FIN 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.| Nestl SA vs. Richardson Electronics | Nestl SA vs. Arrow Electronics | Nestl SA vs. AOI Electronics Co | Nestl SA vs. Renesas Electronics |
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 Anywhere module to track or share privately all of your investments from the convenience of any device.
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