Correlation Between Kellanova and Nestle SA

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

Diversification Opportunities for Kellanova and Nestle SA

0.3
  Correlation Coefficient

Weak diversification

The 3 months correlation between Kellanova and Nestle is 0.3. Overlapping area represents the amount of risk that can be diversified away by holding Kellanova and Nestle SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nestle SA and Kellanova 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 Kellanova 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 Kellanova i.e., Kellanova and Nestle SA go up and down completely randomly.

Pair Corralation between Kellanova and Nestle SA

Taking into account the 90-day investment horizon Kellanova is expected to generate 1.03 times more return on investment than Nestle SA. However, Kellanova is 1.03 times more volatile than Nestle SA. It trades about -0.02 of its potential returns per unit of risk. Nestle SA is currently generating about -0.03 per unit of risk. If you would invest  6,186  in Kellanova on December 29, 2023 and sell it today you would lose (521.00) from holding Kellanova or give up 8.42% of portfolio value over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthVery Weak
Accuracy100.0%
ValuesDaily Returns

Kellanova  vs.  Nestle SA

 Performance 
       Timeline  
Kellanova 

Risk-Adjusted Performance

1 of 100

 
Low
 
High
Weak
Compared to the overall equity markets, risk-adjusted returns on investments in Kellanova are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite quite persistent forward-looking signals, Kellanova is not utilizing all of its potentials. The current stock price mess, may contribute to short-term losses for the institutional investors.
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.

Kellanova and Nestle SA Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Kellanova and Nestle SA

The main advantage of trading using opposite Kellanova and Nestle SA positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Kellanova 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 Kellanova 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 Companies Directory module to evaluate performance of over 100,000 Stocks, Funds, and ETFs against different fundamentals.

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