Correlation Between Nomad Foods and Carsales
Can any of the company-specific risk be diversified away by investing in both Nomad Foods and Carsales 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 Carsales into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Nomad Foods and CarsalesCom, you can compare the effects of market volatilities on Nomad Foods and Carsales 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 Carsales. Check out your portfolio center. Please also check ongoing floating volatility patterns of Nomad Foods and Carsales.
Diversification Opportunities for Nomad Foods and Carsales
0.38 | Correlation Coefficient |
Weak diversification
The 3 months correlation between Nomad and Carsales is 0.38. Overlapping area represents the amount of risk that can be diversified away by holding Nomad Foods and CarsalesCom in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CarsalesCom 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 Carsales. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CarsalesCom has no effect on the direction of Nomad Foods i.e., Nomad Foods and Carsales go up and down completely randomly.
Pair Corralation between Nomad Foods and Carsales
Assuming the 90 days trading horizon Nomad Foods is expected to under-perform the Carsales. But the stock apears to be less risky and, when comparing its historical volatility, Nomad Foods is 1.05 times less risky than Carsales. The stock trades about -0.46 of its potential returns per unit of risk. The CarsalesCom is currently generating about -0.03 of returns per unit of risk over similar time horizon. If you would invest 2,280 in CarsalesCom on October 14, 2024 and sell it today you would lose (20.00) from holding CarsalesCom or give up 0.88% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Nomad Foods vs. CarsalesCom
Performance |
| Timeline |
| Nomad Foods |
| CarsalesCom |
Nomad Foods and Carsales Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Nomad Foods and Carsales
The main advantage of trading using opposite Nomad Foods and Carsales positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Nomad Foods position performs unexpectedly, Carsales 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 Carsales will offset losses from the drop in Carsales' long position.| Nomad Foods vs. National Beverage Corp | Nomad Foods vs. Tencent Music Entertainment | Nomad Foods vs. SENECA FOODS A | Nomad Foods vs. MTY Food Group |
| Carsales vs. MAG SILVER | Carsales vs. Nomad Foods | Carsales vs. De Grey Mining | Carsales vs. Endeavour Mining PLC |
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 Cryptocurrency Center module to build and monitor diversified portfolio of extremely risky digital assets and cryptocurrency.
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