Correlation Between Nestl SA and UBS Group

Can any of the company-specific risk be diversified away by investing in both Nestl SA and UBS 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 UBS 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 UBS Group AG, you can compare the effects of market volatilities on Nestl SA and UBS 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 UBS Group. Check out your portfolio center. Please also check ongoing floating volatility patterns of Nestl SA and UBS Group.

Diversification Opportunities for Nestl SA and UBS Group

-0.51

Correlation Coefficient

Nestl SA  UBS Group

Excellent diversification

The 3 months correlation between Nestl and UBS is -0.51. Overlapping area represents the amount of risk that can be diversified away by holding Nestl SA and UBS Group AG in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on UBS 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 UBS Group. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of UBS Group AG has no effect on the direction of Nestl SA i.e., Nestl SA and UBS Group go up and down completely randomly.

Pair Corralation between Nestl SA and UBS Group

Assuming the 90 days trading horizon Nestl SA is expected to under-perform the UBS Group. But the stock apears to be less risky and, when comparing its historical volatility, Nestl SA is 1.98 times less risky than UBS Group. The stock trades about -0.22 of its potential returns per unit of risk. The UBS Group AG is currently generating about 0.18 of returns per unit of risk over similar time horizon. If you would invest  2,447  in UBS Group AG on April 24, 2025 and sell it today you would earn a total of  487.00  from holding UBS Group AG or generate 19.9% 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.  UBS 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.

UBS Group AG

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in UBS Group AG are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. In spite of fairly uncertain basic indicators, UBS Group showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Nestl SA and UBS Group

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

The idea behind Nestl SA and UBS 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.

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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 Transaction History module to view history of all your transactions and understand their impact on performance.