Correlation Between Nestle Bhd and Kluang Rubber
Can any of the company-specific risk be diversified away by investing in both Nestle Bhd and Kluang Rubber 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 Bhd and Kluang Rubber into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Nestle Bhd and Kluang Rubber, you can compare the effects of market volatilities on Nestle Bhd and Kluang Rubber 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 Bhd with a short position of Kluang Rubber. Check out your portfolio center. Please also check ongoing floating volatility patterns of Nestle Bhd and Kluang Rubber.
Diversification Opportunities for Nestle Bhd and Kluang Rubber
0.31 | Correlation Coefficient |
Weak diversification
The 3 months correlation between Nestle and Kluang is 0.31. Overlapping area represents the amount of risk that can be diversified away by holding Nestle Bhd and Kluang Rubber in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Kluang Rubber and Nestle Bhd 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 Bhd are associated (or correlated) with Kluang Rubber. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Kluang Rubber has no effect on the direction of Nestle Bhd i.e., Nestle Bhd and Kluang Rubber go up and down completely randomly.
Pair Corralation between Nestle Bhd and Kluang Rubber
Assuming the 90 days trading horizon Nestle Bhd is expected to generate 0.86 times more return on investment than Kluang Rubber. However, Nestle Bhd is 1.16 times less risky than Kluang Rubber. It trades about -0.01 of its potential returns per unit of risk. Kluang Rubber is currently generating about -0.02 per unit of risk. If you would invest 10,124 in Nestle Bhd on September 15, 2024 and sell it today you would lose (124.00) from holding Nestle Bhd or give up 1.22% of portfolio value over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Very Weak |
Accuracy | 98.41% |
Values | Daily Returns |
Nestle Bhd vs. Kluang Rubber
Performance |
Timeline |
Nestle Bhd |
Kluang Rubber |
Nestle Bhd and Kluang Rubber Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Nestle Bhd and Kluang Rubber
The main advantage of trading using opposite Nestle Bhd and Kluang Rubber positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Nestle Bhd position performs unexpectedly, Kluang Rubber 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 Kluang Rubber will offset losses from the drop in Kluang Rubber's long position.Nestle Bhd vs. British American Tobacco | Nestle Bhd vs. FARM FRESH BERHAD | Nestle Bhd vs. Kawan Food Bhd | Nestle Bhd vs. Apollo Food Holdings |
Kluang Rubber vs. Nestle Bhd | Kluang Rubber vs. British American Tobacco | Kluang Rubber vs. FARM FRESH BERHAD | Kluang Rubber vs. Kawan Food Bhd |
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 Funds Screener module to find actively-traded funds from around the world traded on over 30 global exchanges.
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