Correlation Between Nestlé SA and General Mills

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

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

Diversification Opportunities for Nestlé SA and General Mills

0.85

Correlation Coefficient

Nestlé SA  General Mills

Very poor diversification

The 3 months correlation between Nestlé and General is 0.85. Overlapping area represents the amount of risk that can be diversified away by holding Nestl SA and General Mills in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on General Mills 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 General Mills. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of General Mills has no effect on the direction of Nestlé SA i.e., Nestlé SA and General Mills go up and down completely randomly.

Pair Corralation between Nestlé SA and General Mills

Assuming the 90 days trading horizon Nestl SA is expected to generate 0.76 times more return on investment than General Mills. However, Nestl SA is 1.32 times less risky than General Mills. It trades about -0.14 of its potential returns per unit of risk. General Mills is currently generating about -0.13 per unit of risk. If you would invest  9,300  in Nestl SA on April 24, 2025 and sell it today you would lose (920.00) from holding Nestl SA or give up 9.89% of portfolio value over 90 days.

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

Nestl SA  vs.  General Mills

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.

General Mills

Risk-Adjusted Performance

Very Weak

Over the last 90 days General Mills has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest fragile 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.

Pair Trading with Nestlé SA and General Mills

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

The idea behind Nestl SA and General Mills 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 Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.