Correlation Between Nomad Foods and Vestas Wind

Can any of the company-specific risk be diversified away by investing in both Nomad Foods and Vestas Wind 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 Vestas Wind into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Nomad Foods and Vestas Wind Systems, you can compare the effects of market volatilities on Nomad Foods and Vestas Wind 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 Vestas Wind. Check out your portfolio center. Please also check ongoing floating volatility patterns of Nomad Foods and Vestas Wind.

Diversification Opportunities for Nomad Foods and Vestas Wind

0.49

Correlation Coefficient

Nomad Foods  Vestas Wind

Very weak diversification

The 3 months correlation between Nomad and Vestas is 0.49. Overlapping area represents the amount of risk that can be diversified away by holding Nomad Foods and Vestas Wind Systems in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vestas Wind Systems 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 Vestas Wind. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vestas Wind Systems has no effect on the direction of Nomad Foods i.e., Nomad Foods and Vestas Wind go up and down completely randomly.

Pair Corralation between Nomad Foods and Vestas Wind

Assuming the 90 days trading horizon Nomad Foods is expected to generate 0.71 times more return on investment than Vestas Wind. However, Nomad Foods is 1.41 times less risky than Vestas Wind. It trades about 0.11 of its potential returns per unit of risk. Vestas Wind Systems is currently generating about 0.07 per unit of risk. If you would invest  1,555  in Nomad Foods on December 24, 2024 and sell it today you would earn a total of  205.00  from holding Nomad Foods or generate 13.18% return on investment over 90 days.

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

Nomad Foods  vs.  Vestas Wind Systems

Nomad Foods

Risk-Adjusted Performance

OK

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

Vestas Wind Systems

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Vestas Wind Systems are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of rather uncertain fundamental drivers, Vestas Wind exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Nomad Foods and Vestas Wind

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

The idea behind Nomad Foods and Vestas Wind Systems 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 Pattern Recognition module to use different Pattern Recognition models to time the market across multiple global exchanges.