Correlation Between Nestl SA and Flughafen Zurich

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

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

Diversification Opportunities for Nestl SA and Flughafen Zurich

-0.52

Correlation Coefficient

Nestl SA  Flughafen Zurich

Excellent diversification

The 3 months correlation between Nestl and Flughafen is -0.52. Overlapping area represents the amount of risk that can be diversified away by holding Nestl SA and Flughafen Zurich in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Flughafen Zurich and Nestl 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 Flughafen Zurich. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Flughafen Zurich has no effect on the direction of Nestl SA i.e., Nestl SA and Flughafen Zurich go up and down completely randomly.

Pair Corralation between Nestl SA and Flughafen Zurich

Assuming the 90 days trading horizon Nestl SA is expected to under-perform the Flughafen Zurich. But the stock apears to be less risky and, when comparing its historical volatility, Nestl SA is 1.11 times less risky than Flughafen Zurich. The stock trades about -0.26 of its potential returns per unit of risk. The Flughafen Zurich is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest  20,040  in Flughafen Zurich on September 13, 2024 and sell it today you would earn a total of  1,640  from holding Flughafen Zurich or generate 8.18% return on investment over 90 days.

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

Nestl SA  vs.  Flughafen Zurich

Nestl 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. In spite of abnormal performance in the last few months, the Stock's basic indicators remain fairly stable which may send shares a bit higher in January 2025. The latest fuss may also be a sign of long-term up-swing for the venture sophisticated investors.

Flughafen Zurich

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Flughafen Zurich are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Flughafen Zurich may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Nestl SA and Flughafen Zurich

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

The idea behind Nestl SA and Flughafen Zurich 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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.