Correlation Between Compagnie Financiere and Nestl SA
Can any of the company-specific risk be diversified away by investing in both Compagnie Financiere and Nestl SA 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 Compagnie Financiere and Nestl SA into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Compagnie Financiere Tradition and Nestl SA, you can compare the effects of market volatilities on Compagnie Financiere and Nestl SA 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 Compagnie Financiere with a short position of Nestl SA. Check out your portfolio center. Please also check ongoing floating volatility patterns of Compagnie Financiere and Nestl SA.
Diversification Opportunities for Compagnie Financiere and Nestl SA
0.65 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Compagnie and Nestl is 0.65. Overlapping area represents the amount of risk that can be diversified away by holding Compagnie Financiere Tradition and Nestl SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nestl SA and Compagnie Financiere 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 Compagnie Financiere Tradition are associated (or correlated) with Nestl SA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nestl SA has no effect on the direction of Compagnie Financiere i.e., Compagnie Financiere and Nestl SA go up and down completely randomly.
Pair Corralation between Compagnie Financiere and Nestl SA
Assuming the 90 days trading horizon Compagnie Financiere Tradition is expected to generate 0.97 times more return on investment than Nestl SA. However, Compagnie Financiere Tradition is 1.04 times less risky than Nestl SA. It trades about 0.14 of its potential returns per unit of risk. Nestl SA is currently generating about 0.09 per unit of risk. If you would invest 26,000 in Compagnie Financiere Tradition on August 25, 2025 and sell it today you would earn a total of 3,500 from holding Compagnie Financiere Tradition or generate 13.46% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Compagnie Financiere Tradition vs. Nestl SA
Performance |
| Timeline |
| Compagnie Financiere |
| Nestl SA |
Compagnie Financiere and Nestl SA Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Compagnie Financiere and Nestl SA
The main advantage of trading using opposite Compagnie Financiere and Nestl SA positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Compagnie Financiere position performs unexpectedly, Nestl SA 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 Nestl SA will offset losses from the drop in Nestl SA's long position.| Compagnie Financiere vs. Berner Kantonalbank AG | Compagnie Financiere vs. Liechtensteinische Landesbank AG | Compagnie Financiere vs. Zuger Kantonalbank | Compagnie Financiere vs. Valiant Holding AG |
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 Money Managers module to screen money managers from public funds and ETFs managed around the world.
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