Correlation Between Nestlé SA and ASSOC BR

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

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

Diversification Opportunities for Nestlé SA and ASSOC BR

0.26

Correlation Coefficient

Nestlé SA  ASSOC BR

Modest diversification

The 3 months correlation between Nestlé and ASSOC is 0.26. Overlapping area represents the amount of risk that can be diversified away by holding Nestl SA and ASSOC BR FOODS in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ASSOC BR FOODS 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 ASSOC BR. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ASSOC BR FOODS has no effect on the direction of Nestlé SA i.e., Nestlé SA and ASSOC BR go up and down completely randomly.

Pair Corralation between Nestlé SA and ASSOC BR

Assuming the 90 days trading horizon Nestl SA is expected to under-perform the ASSOC BR. But the stock apears to be less risky and, when comparing its historical volatility, Nestl SA is 1.67 times less risky than ASSOC BR. The stock trades about -0.13 of its potential returns per unit of risk. The ASSOC BR FOODS is currently generating about -0.01 of returns per unit of risk over similar time horizon. If you would invest  2,534  in ASSOC BR FOODS on April 20, 2025 and sell it today you would lose (54.00) from holding ASSOC BR FOODS or give up 2.13% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	98.44%
Values	Daily Returns

Nestl SA  vs.  ASSOC BR FOODS

Nestlé SA

Risk-Adjusted Performance

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.

ASSOC BR FOODS

Risk-Adjusted Performance

Very Weak

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

Pair Trading with Nestlé SA and ASSOC BR

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

The idea behind Nestl SA and ASSOC BR FOODS 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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..