Correlation Between PT Steel and Nomad Foods

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

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

Diversification Opportunities for PT Steel and Nomad Foods

0.01

Correlation Coefficient

PT Steel  Nomad Foods

Significant diversification

The 3 months correlation between S08 and Nomad is 0.01. Overlapping area represents the amount of risk that can be diversified away by holding PT Steel Pipe and Nomad Foods in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nomad Foods and PT Steel 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 PT Steel Pipe 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 PT Steel i.e., PT Steel and Nomad Foods go up and down completely randomly.

Pair Corralation between PT Steel and Nomad Foods

Assuming the 90 days horizon PT Steel Pipe is expected to under-perform the Nomad Foods. In addition to that, PT Steel is 5.35 times more volatile than Nomad Foods. It trades about -0.02 of its total potential returns per unit of risk. Nomad Foods is currently generating about -0.04 per unit of volatility. If you would invest  1,570  in Nomad Foods on October 10, 2024 and sell it today you would lose (20.00) from holding Nomad Foods or give up 1.27% of portfolio value over 90 days.

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

PT Steel Pipe  vs.  Nomad Foods

PT Steel Pipe

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days PT Steel Pipe has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fragile performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Nomad Foods

Risk-Adjusted Performance

0 of 100

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 PT Steel and Nomad Foods

The main advantage of trading using opposite PT Steel and Nomad Foods positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if PT Steel 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 PT Steel Pipe 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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.