Correlation Between Nomad Foods and Amazon
Can any of the company-specific risk be diversified away by investing in both Nomad Foods and Amazon 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 Nomad Foods and Amazon into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Nomad Foods and Amazon Inc, you can compare the effects of market volatilities on Nomad Foods and Amazon 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 Nomad Foods with a short position of Amazon. Check out your portfolio center. Please also check ongoing floating volatility patterns of Nomad Foods and Amazon.
Diversification Opportunities for Nomad Foods and Amazon
0.03 | Correlation Coefficient |
Significant diversification
The 3 months correlation between Nomad and Amazon is 0.03. Overlapping area represents the amount of risk that can be diversified away by holding Nomad Foods and Amazon Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Amazon Inc and Nomad 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 Nomad Foods are associated (or correlated) with Amazon. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Amazon Inc has no effect on the direction of Nomad Foods i.e., Nomad Foods and Amazon go up and down completely randomly.
Pair Corralation between Nomad Foods and Amazon
Assuming the 90 days trading horizon Nomad Foods is expected to generate 4.28 times less return on investment than Amazon. But when comparing it to its historical volatility, Nomad Foods is 1.17 times less risky than Amazon. It trades about 0.02 of its potential returns per unit of risk. Amazon Inc is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest 16,988 in Amazon Inc on October 17, 2024 and sell it today you would earn a total of 4,012 from holding Amazon Inc or generate 23.62% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Nomad Foods vs. Amazon Inc
Performance |
| Timeline |
| Nomad Foods |
| Amazon Inc |
Nomad Foods and Amazon Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Nomad Foods and Amazon
The main advantage of trading using opposite Nomad Foods and Amazon positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Nomad Foods position performs unexpectedly, Amazon 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 Amazon will offset losses from the drop in Amazon's long position.| Nomad Foods vs. PARKEN Sport Entertainment | Nomad Foods vs. CLOVER HEALTH INV | Nomad Foods vs. ZINC MEDIA GR | Nomad Foods vs. HEALTHSTREAM |
| Amazon vs. Tyson Foods | Amazon vs. EIDESVIK OFFSHORE NK | Amazon vs. PT Wintermar Offshore | Amazon vs. Nomad Foods |
Check out your portfolio center.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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.
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