Correlation Between SAN MIGUEL and Nomad Foods

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

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

Diversification Opportunities for SAN MIGUEL and Nomad Foods

0.44

Correlation Coefficient

SAN MIGUEL  Nomad Foods

Very weak diversification

The 3 months correlation between SAN and Nomad is 0.44. Overlapping area represents the amount of risk that can be diversified away by holding SAN MIGUEL BREWERY and Nomad Foods in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nomad Foods and SAN MIGUEL 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 SAN MIGUEL BREWERY 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 SAN MIGUEL i.e., SAN MIGUEL and Nomad Foods go up and down completely randomly.

Pair Corralation between SAN MIGUEL and Nomad Foods

Assuming the 90 days trading horizon SAN MIGUEL BREWERY is expected to under-perform the Nomad Foods. In addition to that, SAN MIGUEL is 2.01 times more volatile than Nomad Foods. It trades about 0.0 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  1,585  in Nomad Foods on December 20, 2024 and sell it today you would earn a total of  205.00  from holding Nomad Foods or generate 12.93% return on investment over 90 days.

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

SAN MIGUEL BREWERY  vs.  Nomad Foods

SAN MIGUEL BREWERY

Risk-Adjusted Performance

Very Weak

Over the last 90 days SAN MIGUEL BREWERY has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound basic indicators, SAN MIGUEL is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

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 SAN MIGUEL and Nomad Foods

The main advantage of trading using opposite SAN MIGUEL and Nomad Foods positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if SAN MIGUEL 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 SAN MIGUEL BREWERY 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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.