Correlation Between Nestle SA and WH Group
Can any of the company-specific risk be diversified away by investing in both Nestle SA and WH Group 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 WH Group into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Nestle SA and WH Group Ltd, you can compare the effects of market volatilities on Nestle SA and WH Group 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 WH Group. Check out your portfolio center. Please also check ongoing floating volatility patterns of Nestle SA and WH Group.
Diversification Opportunities for Nestle SA and WH Group
Pay attention - limited upside
The 3 months correlation between Nestle and WHGLY is -0.72. Overlapping area represents the amount of risk that can be diversified away by holding Nestle SA and WH Group Ltd in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on WH 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 WH Group. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of WH Group has no effect on the direction of Nestle SA i.e., Nestle SA and WH Group go up and down completely randomly.
Pair Corralation between Nestle SA and WH Group
Assuming the 90 days horizon Nestle SA is expected to under-perform the WH Group. But the pink sheet apears to be less risky and, when comparing its historical volatility, Nestle SA is 1.64 times less risky than WH Group. The pink sheet trades about -0.04 of its potential returns per unit of risk. The WH Group Ltd is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest 1,340 in WH Group Ltd on January 21, 2024 and sell it today you would earn a total of 34.00 from holding WH Group Ltd or generate 2.54% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 95.45% |
| Values | Daily Returns |
Nestle SA vs. WH Group Ltd
Performance |
| Timeline |
| Nestle SA |
| WH Group |
Nestle SA and WH Group Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Nestle SA and WH Group
The main advantage of trading using opposite Nestle SA and WH Group positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Nestle SA position performs unexpectedly, WH Group 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 WH Group will offset losses from the drop in WH Group's long position.| Nestle SA vs. Kellanova | Nestle SA vs. Lancaster Colony | Nestle SA vs. The A2 Milk | Nestle SA vs. Artisan Consumer Goods |
| WH Group vs. Kellanova | WH Group vs. Lancaster Colony | WH Group vs. The A2 Milk | WH Group 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 Portfolio Anywhere module to track or share privately all of your investments from the convenience of any device.
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