Correlation Between Nestle SA and Visa
Can any of the company-specific risk be diversified away by investing in both Nestle SA and Visa 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 Visa into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Nestle SA and Visa Class A, you can compare the effects of market volatilities on Nestle SA and Visa 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 Visa. Check out your portfolio center. Please also check ongoing floating volatility patterns of Nestle SA and Visa.
Diversification Opportunities for Nestle SA and Visa
Very good diversification
The 3 months correlation between Nestle and Visa is -0.28. Overlapping area represents the amount of risk that can be diversified away by holding Nestle SA and Visa Class A in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Visa Class A 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 Visa. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Visa Class A has no effect on the direction of Nestle SA i.e., Nestle SA and Visa go up and down completely randomly.
Pair Corralation between Nestle SA and Visa
Assuming the 90 days horizon Nestle SA is expected to under-perform the Visa. In addition to that, Nestle SA is 1.2 times more volatile than Visa Class A. It trades about -0.07 of its total potential returns per unit of risk. Visa Class A is currently generating about 0.08 per unit of volatility. If you would invest 22,637 in Visa Class A on January 21, 2024 and sell it today you would earn a total of 4,341 from holding Visa Class A or generate 19.18% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 99.6% |
| Values | Daily Returns |
Nestle SA vs. Visa Class A
Performance |
| Timeline |
| Nestle SA |
| Visa Class A |
Nestle SA and Visa Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Nestle SA and Visa
The main advantage of trading using opposite Nestle SA and Visa positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Nestle SA position performs unexpectedly, Visa 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 Visa will offset losses from the drop in Visa's long position.| Nestle SA vs. Kellanova | Nestle SA vs. Lancaster Colony | Nestle SA vs. The A2 Milk | Nestle SA vs. Artisan Consumer Goods |
| Visa vs. American Express | Visa vs. Capital One Financial | Visa vs. Upstart HoldingsInc | Visa vs. Ally Financial |
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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.
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