Correlation Between Nestle SA and Associated British
Can any of the company-specific risk be diversified away by investing in both Nestle SA and Associated British 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 Nestle SA and Associated British into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Nestle SA and Associated British Foods, you can compare the effects of market volatilities on Nestle SA and Associated British 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 Nestle SA with a short position of Associated British. Check out your portfolio center. Please also check ongoing floating volatility patterns of Nestle SA and Associated British.
Diversification Opportunities for Nestle SA and Associated British
-0.39 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Nestle and Associated is -0.39. Overlapping area represents the amount of risk that can be diversified away by holding Nestle SA and Associated British Foods in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Associated British Foods and Nestle SA 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 Nestle SA are associated (or correlated) with Associated British. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Associated British Foods has no effect on the direction of Nestle SA i.e., Nestle SA and Associated British go up and down completely randomly.
Pair Corralation between Nestle SA and Associated British
Assuming the 90 days horizon Nestle SA is expected to under-perform the Associated British. But the pink sheet apears to be less risky and, when comparing its historical volatility, Nestle SA is 1.45 times less risky than Associated British. The pink sheet trades about -0.08 of its potential returns per unit of risk. The Associated British Foods is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest 3,028 in Associated British Foods on January 26, 2024 and sell it today you would earn a total of 327.00 from holding Associated British Foods or generate 10.8% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 98.41% |
| Values | Daily Returns |
Nestle SA vs. Associated British Foods
Performance |
| Timeline |
| Nestle SA |
| Associated British Foods |
Nestle SA and Associated British Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Nestle SA and Associated British
The main advantage of trading using opposite Nestle SA and Associated British positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Nestle SA position performs unexpectedly, Associated British 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 Associated British will offset losses from the drop in Associated British's long position.| Nestle SA vs. Kellanova | Nestle SA vs. Lancaster Colony | Nestle SA vs. The A2 Milk | Nestle SA vs. Artisan Consumer Goods |
| Associated British vs. Kellanova | Associated British vs. Lancaster Colony | Associated British vs. The A2 Milk | Associated British vs. Artisan Consumer Goods |
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 Financial Widgets module to easily integrated Macroaxis content with over 30 different plug-and-play financial widgets.
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