Correlation Between Nestle SA and Kikkoman

Can any of the company-specific risk be diversified away by investing in both Nestle SA and Kikkoman 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 Kikkoman into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Nestle SA and Kikkoman, you can compare the effects of market volatilities on Nestle SA and Kikkoman 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 Kikkoman. Check out your portfolio center. Please also check ongoing floating volatility patterns of Nestle SA and Kikkoman.

Diversification Opportunities for Nestle SA and Kikkoman

0.62

Correlation Coefficient

Nestle SA  Kikkoman

Poor diversification

The 3 months correlation between Nestle and Kikkoman is 0.62. Overlapping area represents the amount of risk that can be diversified away by holding Nestle SA and Kikkoman in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Kikkoman 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 Kikkoman. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Kikkoman has no effect on the direction of Nestle SA i.e., Nestle SA and Kikkoman go up and down completely randomly.

Pair Corralation between Nestle SA and Kikkoman

Assuming the 90 days horizon Nestle SA is expected to under-perform the Kikkoman. But the pink sheet apears to be less risky and, when comparing its historical volatility, Nestle SA is 1.08 times less risky than Kikkoman. The pink sheet trades about -0.19 of its potential returns per unit of risk. The Kikkoman is currently generating about -0.12 of returns per unit of risk over similar time horizon. If you would invest  1,011  in Kikkoman on May 6, 2025 and sell it today you would lose (128.00) from holding Kikkoman or give up 12.66% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	100.0%
Values	Daily Returns

Nestle SA  vs.  Kikkoman

Nestle SA

Risk-Adjusted Performance

Very Weak

Over the last 90 days Nestle SA has generated negative risk-adjusted returns adding no value to investors with long positions. Despite uncertain performance in the last few months, the Stock's technical and fundamental indicators remain nearly stable which may send shares a bit higher in September 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Kikkoman

Risk-Adjusted Performance

Very Weak

Over the last 90 days Kikkoman has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in September 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with Nestle SA and Kikkoman

The main advantage of trading using opposite Nestle SA and Kikkoman positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Nestle SA position performs unexpectedly, Kikkoman 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 Kikkoman will offset losses from the drop in Kikkoman's long position.

The idea behind Nestle SA and Kikkoman 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 Portfolio Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.