Correlation Between Nomad Foods and Phillips
Can any of the company-specific risk be diversified away by investing in both Nomad Foods and Phillips 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 Phillips into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Nomad Foods and Phillips 66, you can compare the effects of market volatilities on Nomad Foods and Phillips 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 Phillips. Check out your portfolio center. Please also check ongoing floating volatility patterns of Nomad Foods and Phillips.
Diversification Opportunities for Nomad Foods and Phillips
0.42 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Nomad and Phillips is 0.42. Overlapping area represents the amount of risk that can be diversified away by holding Nomad Foods and Phillips 66 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Phillips 66 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 Phillips. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Phillips 66 has no effect on the direction of Nomad Foods i.e., Nomad Foods and Phillips go up and down completely randomly.
Pair Corralation between Nomad Foods and Phillips
Assuming the 90 days trading horizon Nomad Foods is expected to generate 1.87 times less return on investment than Phillips. But when comparing it to its historical volatility, Nomad Foods is 1.01 times less risky than Phillips. It trades about 0.03 of its potential returns per unit of risk. Phillips 66 is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest 7,937 in Phillips 66 on December 12, 2024 and sell it today you would earn a total of 3,333 from holding Phillips 66 or generate 41.99% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Nomad Foods vs. Phillips 66
Performance |
| Timeline |
| Nomad Foods |
| Phillips 66 |
Nomad Foods and Phillips Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Nomad Foods and Phillips
The main advantage of trading using opposite Nomad Foods and Phillips positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Nomad Foods position performs unexpectedly, Phillips 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 Phillips will offset losses from the drop in Phillips' long position.| Nomad Foods vs. S E BANKEN A | ||
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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 Global Correlations module to find global opportunities by holding instruments from different markets.
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