Correlation Between Nestl SA and Adecco Group

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

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

Diversification Opportunities for Nestl SA and Adecco Group

-0.66

Correlation Coefficient

Nestl SA  Adecco Group

Excellent diversification

The 3 months correlation between Nestl and Adecco is -0.66. Overlapping area represents the amount of risk that can be diversified away by holding Nestl SA and Adecco Group AG in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Adecco Group AG 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 Adecco Group. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Adecco Group AG has no effect on the direction of Nestl SA i.e., Nestl SA and Adecco Group go up and down completely randomly.

Pair Corralation between Nestl SA and Adecco Group

Assuming the 90 days trading horizon Nestl SA is expected to under-perform the Adecco Group. But the stock apears to be less risky and, when comparing its historical volatility, Nestl SA is 2.9 times less risky than Adecco Group. The stock trades about -0.22 of its potential returns per unit of risk. The Adecco Group AG is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest  2,204  in Adecco Group AG on April 23, 2025 and sell it today you would earn a total of  354.00  from holding Adecco Group AG or generate 16.06% return on investment over 90 days.

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

Nestl SA  vs.  Adecco Group AG

Nestl 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. In spite of latest abnormal performance, the Stock's basic indicators remain stable and the latest fuss on Wall Street may also be a sign of long-term gains for the venture sophisticated investors.

Adecco Group AG

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Adecco Group AG are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Adecco Group showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Nestl SA and Adecco Group

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

The idea behind Nestl SA and Adecco Group AG 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.

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 Portfolio Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.