Correlation Between Nomad Foods and Norsk Hydro
Can any of the company-specific risk be diversified away by investing in both Nomad Foods and Norsk Hydro 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 Norsk Hydro into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Nomad Foods and Norsk Hydro ASA, you can compare the effects of market volatilities on Nomad Foods and Norsk Hydro 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 Norsk Hydro. Check out your portfolio center. Please also check ongoing floating volatility patterns of Nomad Foods and Norsk Hydro.
Diversification Opportunities for Nomad Foods and Norsk Hydro
0.32 | Correlation Coefficient |
Weak diversification
The 3 months correlation between Nomad and Norsk is 0.32. Overlapping area represents the amount of risk that can be diversified away by holding Nomad Foods and Norsk Hydro ASA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Norsk Hydro ASA 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 Norsk Hydro. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Norsk Hydro ASA has no effect on the direction of Nomad Foods i.e., Nomad Foods and Norsk Hydro go up and down completely randomly.
Pair Corralation between Nomad Foods and Norsk Hydro
Assuming the 90 days trading horizon Nomad Foods is expected to generate 0.94 times more return on investment than Norsk Hydro. However, Nomad Foods is 1.06 times less risky than Norsk Hydro. It trades about 0.2 of its potential returns per unit of risk. Norsk Hydro ASA is currently generating about 0.07 per unit of risk. If you would invest 1,550 in Nomad Foods on November 5, 2024 and sell it today you would earn a total of 140.00 from holding Nomad Foods or generate 9.03% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Nomad Foods vs. Norsk Hydro ASA
Performance |
| Timeline |
| Nomad Foods |
| Norsk Hydro ASA |
Nomad Foods and Norsk Hydro Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Nomad Foods and Norsk Hydro
The main advantage of trading using opposite Nomad Foods and Norsk Hydro positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Nomad Foods position performs unexpectedly, Norsk Hydro 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 Norsk Hydro will offset losses from the drop in Norsk Hydro's long position.| Nomad Foods vs. RCI Hospitality Holdings | Nomad Foods vs. INVITATION HOMES DL | Nomad Foods vs. KENEDIX OFFICE INV | Nomad Foods vs. DFS Furniture PLC |
| Norsk Hydro vs. AIR PRODCHEMICALS | Norsk Hydro vs. PKSHA TECHNOLOGY INC | Norsk Hydro vs. Minerals Technologies | Norsk Hydro vs. Mitsui Chemicals |
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 Portfolio Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.
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