Correlation Between Zoom Video and Nomad Foods

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

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

Diversification Opportunities for Zoom Video and Nomad Foods

-0.65

Correlation Coefficient

Zoom Video  Nomad Foods

Excellent diversification

The 3 months correlation between Zoom and Nomad is -0.65. Overlapping area represents the amount of risk that can be diversified away by holding Zoom Video Communications and Nomad Foods in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nomad Foods and Zoom Video 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 Zoom Video Communications 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 Zoom Video i.e., Zoom Video and Nomad Foods go up and down completely randomly.

Pair Corralation between Zoom Video and Nomad Foods

Assuming the 90 days trading horizon Zoom Video Communications is expected to under-perform the Nomad Foods. In addition to that, Zoom Video is 1.16 times more volatile than Nomad Foods. It trades about -0.06 of its total potential returns per unit of risk. Nomad Foods is currently generating about 0.14 per unit of volatility. If you would invest  1,525  in Nomad Foods on December 29, 2024 and sell it today you would earn a total of  275.00  from holding Nomad Foods or generate 18.03% return on investment over 90 days.

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

Zoom Video Communications  vs.  Nomad Foods

Zoom Video Communications

Risk-Adjusted Performance

Very Weak

Over the last 90 days Zoom Video Communications has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest uncertain performance, the Stock's basic indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

Nomad Foods

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Nomad Foods are ranked lower than 11 (%) 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 Zoom Video and Nomad Foods

The main advantage of trading using opposite Zoom Video and Nomad Foods positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Zoom Video 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 Zoom Video Communications 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.

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 Portfolio Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.