Correlation Between Sunzen Biotech and Nestle Bhd

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

By analyzing existing cross correlation between Sunzen Biotech Bhd and Nestle Bhd, you can compare the effects of market volatilities on Sunzen Biotech and Nestle Bhd 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 Sunzen Biotech with a short position of Nestle Bhd. Check out your portfolio center. Please also check ongoing floating volatility patterns of Sunzen Biotech and Nestle Bhd.

Diversification Opportunities for Sunzen Biotech and Nestle Bhd

0.8

Correlation Coefficient

Sunzen Biotech  Nestle Bhd

Very poor diversification

The 3 months correlation between Sunzen and Nestle is 0.8. Overlapping area represents the amount of risk that can be diversified away by holding Sunzen Biotech Bhd and Nestle Bhd in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nestle Bhd and Sunzen Biotech 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 Sunzen Biotech Bhd are associated (or correlated) with Nestle Bhd. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nestle Bhd has no effect on the direction of Sunzen Biotech i.e., Sunzen Biotech and Nestle Bhd go up and down completely randomly.

Pair Corralation between Sunzen Biotech and Nestle Bhd

Assuming the 90 days trading horizon Sunzen Biotech Bhd is expected to generate 1.2 times more return on investment than Nestle Bhd. However, Sunzen Biotech is 1.2 times more volatile than Nestle Bhd. It trades about 0.01 of its potential returns per unit of risk. Nestle Bhd is currently generating about -0.02 per unit of risk. If you would invest  32.00  in Sunzen Biotech Bhd on September 13, 2024 and sell it today you would earn a total of  0.00  from holding Sunzen Biotech Bhd or generate 0.0% return on investment over 90 days.

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

Sunzen Biotech Bhd  vs.  Nestle Bhd

Sunzen Biotech Bhd

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Sunzen Biotech Bhd has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent basic indicators, Sunzen Biotech is not utilizing all of its potentials. The latest stock price mess, may contribute to short-term losses for the institutional investors.

Nestle Bhd

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Nestle Bhd has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent basic indicators, Nestle Bhd is not utilizing all of its potentials. The latest stock price mess, may contribute to short-term losses for the institutional investors.

Pair Trading with Sunzen Biotech and Nestle Bhd

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

The idea behind Sunzen Biotech Bhd and Nestle Bhd 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 Dashboard module to portfolio dashboard that provides centralized access to all your investments.