Correlation Between Nestle SA and Tate Lyle
Can any of the company-specific risk be diversified away by investing in both Nestle SA and Tate Lyle 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 Tate Lyle into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Nestle SA and Tate Lyle plc, you can compare the effects of market volatilities on Nestle SA and Tate Lyle 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 Tate Lyle. Check out your portfolio center. Please also check ongoing floating volatility patterns of Nestle SA and Tate Lyle.
Diversification Opportunities for Nestle SA and Tate Lyle
Poor diversification
The 3 months correlation between Nestle and Tate is 0.69. Overlapping area represents the amount of risk that can be diversified away by holding Nestle SA and Tate Lyle plc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Tate Lyle plc 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 Tate Lyle. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Tate Lyle plc has no effect on the direction of Nestle SA i.e., Nestle SA and Tate Lyle go up and down completely randomly.
Pair Corralation between Nestle SA and Tate Lyle
Assuming the 90 days horizon Nestle SA is expected to under-perform the Tate Lyle. But the pink sheet apears to be less risky and, when comparing its historical volatility, Nestle SA is 1.14 times less risky than Tate Lyle. The pink sheet trades about -0.02 of its potential returns per unit of risk. The Tate Lyle plc is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest 764.00 in Tate Lyle plc on January 19, 2024 and sell it today you would earn a total of 16.00 from holding Tate Lyle plc or generate 2.09% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 75.15% |
| Values | Daily Returns |
Nestle SA vs. Tate Lyle plc
Performance |
| Timeline |
| Nestle SA |
| Tate Lyle plc |
Nestle SA and Tate Lyle Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Nestle SA and Tate Lyle
The main advantage of trading using opposite Nestle SA and Tate Lyle positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Nestle SA position performs unexpectedly, Tate Lyle 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 Tate Lyle will offset losses from the drop in Tate Lyle's long position.| Nestle SA vs. Kellanova | Nestle SA vs. Lancaster Colony | Nestle SA vs. The A2 Milk | Nestle SA vs. Altavoz Entertainment |
| Tate Lyle vs. Kellanova | Tate Lyle vs. Lancaster Colony | Tate Lyle vs. The A2 Milk | Tate Lyle vs. Altavoz Entertainment |
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 Share Portfolio module to track or share privately all of your investments from the convenience of any device.
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