Correlation Between Clean Energy and Nestl SA
Can any of the company-specific risk be diversified away by investing in both Clean Energy 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 Clean Energy and Nestl SA into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Clean Energy Fuels and Nestl SA, you can compare the effects of market volatilities on Clean Energy 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 Clean Energy with a short position of Nestl SA. Check out your portfolio center. Please also check ongoing floating volatility patterns of Clean Energy and Nestl SA.
Diversification Opportunities for Clean Energy and Nestl SA
-0.19 | Correlation Coefficient |
Good diversification
The 3 months correlation between Clean and Nestl is -0.19. Overlapping area represents the amount of risk that can be diversified away by holding Clean Energy Fuels and Nestl SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nestl SA and Clean Energy 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 Clean Energy Fuels 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 Clean Energy i.e., Clean Energy and Nestl SA go up and down completely randomly.
Pair Corralation between Clean Energy and Nestl SA
Assuming the 90 days horizon Clean Energy Fuels is expected to generate 4.55 times more return on investment than Nestl SA. However, Clean Energy is 4.55 times more volatile than Nestl SA. It trades about 0.12 of its potential returns per unit of risk. Nestl SA is currently generating about -0.2 per unit of risk. If you would invest 262.00 in Clean Energy Fuels on September 4, 2024 and sell it today you would earn a total of 29.00 from holding Clean Energy Fuels or generate 11.07% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Clean Energy Fuels vs. Nestl SA
Performance |
| Timeline |
| Clean Energy Fuels |
| Nestl SA |
Clean Energy and Nestl SA Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Clean Energy and Nestl SA
The main advantage of trading using opposite Clean Energy and Nestl SA positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Clean Energy 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.| Clean Energy vs. Marathon Petroleum Corp | Clean Energy vs. Neste Oyj | Clean Energy vs. ENEOS Holdings | Clean Energy vs. PTT OILRETBUS FOR BA10 |
| 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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.
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