Correlation Between Nestle SA and Leroy Seafood

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

Diversification Opportunities for Nestle SA and Leroy Seafood

-0.38
  Correlation Coefficient

Very good diversification

The 3 months correlation between Nestle and Leroy is -0.38. Overlapping area represents the amount of risk that can be diversified away by holding Nestle SA and Leroy Seafood Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Leroy Seafood Group 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 Leroy Seafood. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Leroy Seafood Group has no effect on the direction of Nestle SA i.e., Nestle SA and Leroy Seafood go up and down completely randomly.

Pair Corralation between Nestle SA and Leroy Seafood

Assuming the 90 days horizon Nestle SA is expected to under-perform the Leroy Seafood. But the pink sheet apears to be less risky and, when comparing its historical volatility, Nestle SA is 3.59 times less risky than Leroy Seafood. The pink sheet trades about -0.02 of its potential returns per unit of risk. The Leroy Seafood Group is currently generating about 0.0 of returns per unit of risk over similar time horizon. If you would invest  1,760  in Leroy Seafood Group on December 30, 2023 and sell it today you would lose (845.00) from holding Leroy Seafood Group or give up 48.01% of portfolio value over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthInsignificant
Accuracy96.96%
ValuesDaily Returns

Nestle SA  vs.  Leroy Seafood Group

 Performance 
       Timeline  
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.
Leroy Seafood Group 

Risk-Adjusted Performance

9 of 100

 
Low
 
High
OK
Compared to the overall equity markets, risk-adjusted returns on investments in Leroy Seafood Group are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of fairly unsteady technical and fundamental indicators, Leroy Seafood showed solid returns over the last few months and may actually be approaching a breakup point.

Nestle SA and Leroy Seafood Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Nestle SA and Leroy Seafood

The main advantage of trading using opposite Nestle SA and Leroy Seafood positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Nestle SA position performs unexpectedly, Leroy Seafood 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 Leroy Seafood will offset losses from the drop in Leroy Seafood's long position.
The idea behind Nestle SA and Leroy Seafood Group 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.
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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 USA ETFs module to find actively traded Exchange Traded Funds (ETF) in USA.

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