Correlation Between Hollywood Bowl and Nomad Foods

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

By analyzing existing cross correlation between Hollywood Bowl Group and Nomad Foods, you can compare the effects of market volatilities on Hollywood Bowl and Nomad Foods 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 Hollywood Bowl with a short position of Nomad Foods. Check out your portfolio center. Please also check ongoing floating volatility patterns of Hollywood Bowl and Nomad Foods.

Diversification Opportunities for Hollywood Bowl and Nomad Foods

-0.31

Correlation Coefficient

Hollywood Bowl  Nomad Foods

Very good diversification

The 3 months correlation between Hollywood and Nomad is -0.31. Overlapping area represents the amount of risk that can be diversified away by holding Hollywood Bowl Group and Nomad Foods in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nomad Foods and Hollywood Bowl 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 Hollywood Bowl Group are associated (or correlated) with Nomad Foods. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nomad Foods has no effect on the direction of Hollywood Bowl i.e., Hollywood Bowl and Nomad Foods go up and down completely randomly.

Pair Corralation between Hollywood Bowl and Nomad Foods

Assuming the 90 days horizon Hollywood Bowl Group is expected to under-perform the Nomad Foods. In addition to that, Hollywood Bowl is 1.01 times more volatile than Nomad Foods. It trades about -0.05 of its total potential returns per unit of risk. Nomad Foods is currently generating about 0.11 per unit of volatility. If you would invest  1,555  in Nomad Foods on December 23, 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 Against
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

Hollywood Bowl Group  vs.  Nomad Foods

Hollywood Bowl Group

Risk-Adjusted Performance

Very Weak

Over the last 90 days Hollywood Bowl Group has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest uncertain performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

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 fragile basic indicators, Nomad Foods unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Hollywood Bowl and Nomad Foods

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

The idea behind Hollywood Bowl Group and Nomad Foods 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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.