Correlation Between SunOpta and Nomad Foods

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

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

Diversification Opportunities for SunOpta and Nomad Foods

-0.15

Correlation Coefficient

SunOpta  Nomad Foods

Good diversification

The 3 months correlation between SunOpta and Nomad is -0.15. Overlapping area represents the amount of risk that can be diversified away by holding SunOpta and Nomad Foods in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nomad Foods and SunOpta 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 SunOpta 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 SunOpta i.e., SunOpta and Nomad Foods go up and down completely randomly.

Pair Corralation between SunOpta and Nomad Foods

Given the investment horizon of 90 days SunOpta is expected to generate 1.25 times more return on investment than Nomad Foods. However, SunOpta is 1.25 times more volatile than Nomad Foods. It trades about 0.0 of its potential returns per unit of risk. Nomad Foods is currently generating about -0.27 per unit of risk. If you would invest  789.00  in SunOpta on October 6, 2024 and sell it today you would lose (3.00) from holding SunOpta or give up 0.38% of portfolio value over 90 days.

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

SunOpta  vs.  Nomad Foods

SunOpta

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in SunOpta are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. Despite quite fragile forward-looking signals, SunOpta disclosed 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 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 SunOpta and Nomad Foods

The main advantage of trading using opposite SunOpta and Nomad Foods positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if SunOpta 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 SunOpta 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.