Correlation Between Simply Good and Nomad Foods

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

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

Diversification Opportunities for Simply Good and Nomad Foods

-0.29

Correlation Coefficient

Simply Good  Nomad Foods

Very good diversification

The 3 months correlation between Simply and Nomad is -0.29. Overlapping area represents the amount of risk that can be diversified away by holding Simply Good Foods and Nomad Foods in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nomad Foods and Simply Good 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 Simply Good 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 Simply Good i.e., Simply Good and Nomad Foods go up and down completely randomly.

Pair Corralation between Simply Good and Nomad Foods

Given the investment horizon of 90 days Simply Good Foods is expected to under-perform the Nomad Foods. But the stock apears to be less risky and, when comparing its historical volatility, Simply Good Foods is 1.85 times less risky than Nomad Foods. The stock trades about -0.1 of its potential returns per unit of risk. The Nomad Foods is currently generating about -0.03 of returns per unit of risk over similar time horizon. If you would invest  1,710  in Nomad Foods on September 21, 2024 and sell it today you would lose (21.00) from holding Nomad Foods or give up 1.23% of portfolio value over 90 days.

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

Simply Good Foods  vs.  Nomad Foods

Simply Good Foods

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Simply Good Foods are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite quite uncertain basic indicators, Simply Good may actually be approaching a critical reversion point that can send shares even higher in January 2025.

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 latest unsteady performance, the Stock's primary indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

Pair Trading with Simply Good and Nomad Foods

The main advantage of trading using opposite Simply Good and Nomad Foods positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Simply Good 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 Simply Good 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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.