Correlation Between Nomad Foods and Bank of America
Can any of the company-specific risk be diversified away by investing in both Nomad Foods and Bank of America 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 Bank of America into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Nomad Foods and Verizon Communications, you can compare the effects of market volatilities on Nomad Foods and Bank of America 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 Bank of America. Check out your portfolio center. Please also check ongoing floating volatility patterns of Nomad Foods and Bank of America.
Diversification Opportunities for Nomad Foods and Bank of America
0.63 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Nomad and Bank is 0.63. Overlapping area represents the amount of risk that can be diversified away by holding Nomad Foods and Verizon Communications in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Verizon Communications 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 Bank of America. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Verizon Communications has no effect on the direction of Nomad Foods i.e., Nomad Foods and Bank of America go up and down completely randomly.
Pair Corralation between Nomad Foods and Bank of America
Assuming the 90 days trading horizon Nomad Foods is expected to generate 3.8 times less return on investment than Bank of America. In addition to that, Nomad Foods is 1.23 times more volatile than Verizon Communications. It trades about 0.02 of its total potential returns per unit of risk. Verizon Communications is currently generating about 0.08 per unit of volatility. If you would invest 2,538 in Verizon Communications on November 8, 2024 and sell it today you would earn a total of 1,297 from holding Verizon Communications or generate 51.1% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Nomad Foods vs. Verizon Communications
Performance |
| Timeline |
| Nomad Foods |
| Verizon Communications |
Nomad Foods and Bank of America Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Nomad Foods and Bank of America
The main advantage of trading using opposite Nomad Foods and Bank of America positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Nomad Foods position performs unexpectedly, Bank of America 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 Bank of America will offset losses from the drop in Bank of America's long position.| Nomad Foods vs. KENEDIX OFFICE INV | Nomad Foods vs. AWILCO DRILLING PLC | Nomad Foods vs. Focus Home Interactive | Nomad Foods vs. TOMBADOR IRON LTD |
| Bank of America vs. Sterling Construction | Bank of America vs. Perdoceo Education | Bank of America vs. Dairy Farm International | Bank of America vs. Sqs Software Quality |
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 Top Crypto Exchanges module to search and analyze digital assets across top global cryptocurrency exchanges.
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