Correlation Between Nestle SA and Glanbia PLC
Can any of the company-specific risk be diversified away by investing in both Nestle SA and Glanbia PLC 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 Glanbia PLC into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Nestle SA and Glanbia PLC ADR, you can compare the effects of market volatilities on Nestle SA and Glanbia PLC 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 Glanbia PLC. Check out your portfolio center. Please also check ongoing floating volatility patterns of Nestle SA and Glanbia PLC.
Diversification Opportunities for Nestle SA and Glanbia PLC
-0.43 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Nestle and Glanbia is -0.43. Overlapping area represents the amount of risk that can be diversified away by holding Nestle SA and Glanbia PLC ADR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Glanbia PLC ADR 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 Glanbia PLC. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Glanbia PLC ADR has no effect on the direction of Nestle SA i.e., Nestle SA and Glanbia PLC go up and down completely randomly.
Pair Corralation between Nestle SA and Glanbia PLC
Assuming the 90 days horizon Nestle SA is expected to under-perform the Glanbia PLC. But the pink sheet apears to be less risky and, when comparing its historical volatility, Nestle SA is 1.99 times less risky than Glanbia PLC. The pink sheet trades about -0.07 of its potential returns per unit of risk. The Glanbia PLC ADR is currently generating about 0.17 of returns per unit of risk over similar time horizon. If you would invest 8,285 in Glanbia PLC ADR on February 8, 2024 and sell it today you would earn a total of 1,190 from holding Glanbia PLC ADR or generate 14.36% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Against |
Strength | Very Weak |
Accuracy | 100.0% |
Values | Daily Returns |
Nestle SA vs. Glanbia PLC ADR
Performance |
Timeline |
Nestle SA |
Glanbia PLC ADR |
Nestle SA and Glanbia PLC Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Nestle SA and Glanbia PLC
The main advantage of trading using opposite Nestle SA and Glanbia PLC positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Nestle SA position performs unexpectedly, Glanbia PLC 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 Glanbia PLC will offset losses from the drop in Glanbia PLC's long position.Nestle SA vs. HUMANA INC | Nestle SA vs. Barloworld Ltd ADR | Nestle SA vs. Morningstar Unconstrained Allocation | Nestle SA vs. Thrivent High Yield |
Glanbia PLC vs. HUMANA INC | Glanbia PLC vs. Barloworld Ltd ADR | Glanbia PLC vs. Morningstar Unconstrained Allocation | Glanbia PLC vs. Thrivent High Yield |
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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.
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