Correlation Between Apple and Nomad Foods

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

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

Diversification Opportunities for Apple and Nomad Foods

0.45

Correlation Coefficient

Apple  Nomad Foods

Very weak diversification

The 3 months correlation between Apple and Nomad is 0.45. Overlapping area represents the amount of risk that can be diversified away by holding Apple Inc and Nomad Foods in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nomad Foods and Apple 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 Apple Inc 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 Apple i.e., Apple and Nomad Foods go up and down completely randomly.

Pair Corralation between Apple and Nomad Foods

Assuming the 90 days trading horizon Apple Inc is expected to generate 0.79 times more return on investment than Nomad Foods. However, Apple Inc is 1.27 times less risky than Nomad Foods. It trades about 0.1 of its potential returns per unit of risk. Nomad Foods is currently generating about 0.01 per unit of risk. If you would invest  12,326  in Apple Inc on October 5, 2024 and sell it today you would earn a total of  11,364  from holding Apple Inc or generate 92.2% return on investment over 90 days.

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

Apple Inc  vs.  Nomad Foods

Apple Inc

Risk-Adjusted Performance

0 of 100

Solid

Over the last 90 days Apple Inc has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively fragile basic indicators, Apple unveiled solid returns over the last few months and may actually be approaching a breakup point.

Nomad Foods

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Nomad Foods has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Nomad Foods is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Apple and Nomad Foods

The main advantage of trading using opposite Apple and Nomad Foods positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Apple 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 Apple Inc 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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.