Correlation Between EBRO FOODS and Nomad Foods

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

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

Diversification Opportunities for EBRO FOODS and Nomad Foods

0.64

Correlation Coefficient

EBRO FOODS  Nomad Foods

Poor diversification

The 3 months correlation between EBRO and Nomad is 0.64. Overlapping area represents the amount of risk that can be diversified away by holding EBRO FOODS and Nomad Foods in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nomad Foods and EBRO 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 EBRO FOODS 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 EBRO FOODS i.e., EBRO FOODS and Nomad Foods go up and down completely randomly.

Pair Corralation between EBRO FOODS and Nomad Foods

Assuming the 90 days trading horizon EBRO FOODS is expected to generate 3.57 times less return on investment than Nomad Foods. But when comparing it to its historical volatility, EBRO FOODS is 2.37 times less risky than Nomad Foods. It trades about 0.08 of its potential returns per unit of risk. Nomad Foods is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest  1,555  in Nomad Foods on December 22, 2024 and sell it today you would earn a total of  215.00  from holding Nomad Foods or generate 13.83% return on investment over 90 days.

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

EBRO FOODS  vs.  Nomad Foods

EBRO FOODS

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in EBRO FOODS are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, EBRO FOODS is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

Nomad Foods

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Nomad Foods are ranked lower than 9 (%) 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 EBRO FOODS and Nomad Foods

The main advantage of trading using opposite EBRO FOODS and Nomad Foods positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if EBRO FOODS 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 EBRO FOODS 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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..