Correlation Between Nomad Foods and PPG Industries
Can any of the company-specific risk be diversified away by investing in both Nomad Foods and PPG Industries 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 Nomad Foods and PPG Industries into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Nomad Foods and PPG Industries, you can compare the effects of market volatilities on Nomad Foods and PPG Industries 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 Nomad Foods with a short position of PPG Industries. Check out your portfolio center. Please also check ongoing floating volatility patterns of Nomad Foods and PPG Industries.
Diversification Opportunities for Nomad Foods and PPG Industries
0.25 | Correlation Coefficient |
Modest diversification
The 3 months correlation between Nomad and PPG is 0.25. Overlapping area represents the amount of risk that can be diversified away by holding Nomad Foods and PPG Industries in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PPG Industries and Nomad Foods 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 Nomad Foods are associated (or correlated) with PPG Industries. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of PPG Industries has no effect on the direction of Nomad Foods i.e., Nomad Foods and PPG Industries go up and down completely randomly.
Pair Corralation between Nomad Foods and PPG Industries
Assuming the 90 days trading horizon Nomad Foods is expected to generate 1.54 times more return on investment than PPG Industries. However, Nomad Foods is 1.54 times more volatile than PPG Industries. It trades about -0.03 of its potential returns per unit of risk. PPG Industries is currently generating about -0.09 per unit of risk. If you would invest 1,600 in Nomad Foods on October 11, 2024 and sell it today you would lose (40.00) from holding Nomad Foods or give up 2.5% of portfolio value over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Very Weak |
Accuracy | 100.0% |
Values | Daily Returns |
Nomad Foods vs. PPG Industries
Performance |
Timeline |
Nomad Foods |
PPG Industries |
Nomad Foods and PPG Industries Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Nomad Foods and PPG Industries
The main advantage of trading using opposite Nomad Foods and PPG Industries positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Nomad Foods position performs unexpectedly, PPG Industries 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 PPG Industries will offset losses from the drop in PPG Industries' long position.Nomad Foods vs. Calibre Mining Corp | Nomad Foods vs. GALENA MINING LTD | Nomad Foods vs. ECHO INVESTMENT ZY | Nomad Foods vs. Guangdong Investment Limited |
PPG Industries vs. Nomad Foods | PPG Industries vs. INDOFOOD AGRI RES | PPG Industries vs. SCIENCE IN SPORT | PPG Industries vs. CN MODERN DAIRY |
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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.
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