Correlation Between Nestlé SA and Nisshin Seifun

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

By analyzing existing cross correlation between Nestl SA and Nisshin Seifun Group, you can compare the effects of market volatilities on Nestlé SA and Nisshin Seifun 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 Nestlé SA with a short position of Nisshin Seifun. Check out your portfolio center. Please also check ongoing floating volatility patterns of Nestlé SA and Nisshin Seifun.

Diversification Opportunities for Nestlé SA and Nisshin Seifun

-0.49

Correlation Coefficient

Nestlé SA  Nisshin Seifun

Very good diversification

The 3 months correlation between Nestlé and Nisshin is -0.49. Overlapping area represents the amount of risk that can be diversified away by holding Nestl SA and Nisshin Seifun Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nisshin Seifun Group and Nestlé 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 Nestl SA are associated (or correlated) with Nisshin Seifun. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nisshin Seifun Group has no effect on the direction of Nestlé SA i.e., Nestlé SA and Nisshin Seifun go up and down completely randomly.

Pair Corralation between Nestlé SA and Nisshin Seifun

Assuming the 90 days trading horizon Nestl SA is expected to under-perform the Nisshin Seifun. But the stock apears to be less risky and, when comparing its historical volatility, Nestl SA is 1.71 times less risky than Nisshin Seifun. The stock trades about -0.19 of its potential returns per unit of risk. The Nisshin Seifun Group is currently generating about -0.09 of returns per unit of risk over similar time horizon. If you would invest  1,140  in Nisshin Seifun Group on September 23, 2024 and sell it today you would lose (30.00) from holding Nisshin Seifun Group or give up 2.63% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

Nestl SA  vs.  Nisshin Seifun Group

Nestlé SA

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Nestl SA has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest uncertain performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Nisshin Seifun Group

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Nisshin Seifun Group has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Nisshin Seifun is not utilizing all of its potentials. The latest stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Nestlé SA and Nisshin Seifun

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

The idea behind Nestl SA and Nisshin Seifun Group 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 Economic Indicators module to top statistical indicators that provide insights into how an economy is performing.