Correlation Between General Mills and Nestle SA

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Can any of the company-specific risk be diversified away by investing in both General Mills and Nestle 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 General Mills and Nestle SA into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between General Mills and Nestle SA, you can compare the effects of market volatilities on General Mills and Nestle 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 General Mills with a short position of Nestle SA. Check out your portfolio center. Please also check ongoing floating volatility patterns of General Mills and Nestle SA.

Diversification Opportunities for General Mills and Nestle SA

-0.46
  Correlation Coefficient

Very good diversification

The 3 months correlation between General and Nestle is -0.46. Overlapping area represents the amount of risk that can be diversified away by holding General Mills and Nestle SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nestle SA and General Mills 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 General Mills are associated (or correlated) with Nestle SA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nestle SA has no effect on the direction of General Mills i.e., General Mills and Nestle SA go up and down completely randomly.

Pair Corralation between General Mills and Nestle SA

Considering the 90-day investment horizon General Mills is expected to generate 1.09 times more return on investment than Nestle SA. However, General Mills is 1.09 times more volatile than Nestle SA. It trades about 0.39 of its potential returns per unit of risk. Nestle SA is currently generating about -0.06 per unit of risk. If you would invest  6,421  in General Mills on December 29, 2023 and sell it today you would earn a total of  545.00  from holding General Mills or generate 8.49% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthVery Weak
Accuracy100.0%
ValuesDaily Returns

General Mills  vs.  Nestle SA

 Performance 
       Timeline  
General Mills 

Risk-Adjusted Performance

8 of 100

 
Low
 
High
OK
Compared to the overall equity markets, risk-adjusted returns on investments in General Mills are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively fragile forward indicators, General Mills may actually be approaching a critical reversion point that can send shares even higher in April 2024.
Nestle SA 

Risk-Adjusted Performance

0 of 100

 
Low
 
High
Very Weak
Over the last 90 days Nestle SA has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest unsteady performance, the Stock's technical and fundamental indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

General Mills and Nestle SA Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with General Mills and Nestle SA

The main advantage of trading using opposite General Mills and Nestle SA positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if General Mills position performs unexpectedly, Nestle 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 Nestle SA will offset losses from the drop in Nestle SA's long position.
The idea behind General Mills and Nestle 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.
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 Bonds Directory module to find actively traded corporate debentures issued by US companies.

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