Correlation Between Guangdong Investment and Nomad Foods
Can any of the company-specific risk be diversified away by investing in both Guangdong Investment and Nomad Foods 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 Guangdong Investment and Nomad Foods into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Guangdong Investment Limited and Nomad Foods, you can compare the effects of market volatilities on Guangdong Investment and Nomad Foods 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 Guangdong Investment with a short position of Nomad Foods. Check out your portfolio center. Please also check ongoing floating volatility patterns of Guangdong Investment and Nomad Foods.
Diversification Opportunities for Guangdong Investment and Nomad Foods
-0.12 | Correlation Coefficient |
Good diversification
The 3 months correlation between Guangdong and Nomad is -0.12. Overlapping area represents the amount of risk that can be diversified away by holding Guangdong Investment Limited and Nomad Foods in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nomad Foods and Guangdong Investment 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 Guangdong Investment Limited are associated (or correlated) with Nomad Foods. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nomad Foods has no effect on the direction of Guangdong Investment i.e., Guangdong Investment and Nomad Foods go up and down completely randomly.
Pair Corralation between Guangdong Investment and Nomad Foods
Assuming the 90 days horizon Guangdong Investment Limited is expected to generate 2.07 times more return on investment than Nomad Foods. However, Guangdong Investment is 2.07 times more volatile than Nomad Foods. It trades about 0.16 of its potential returns per unit of risk. Nomad Foods is currently generating about -0.1 per unit of risk. If you would invest 66.00 in Guangdong Investment Limited on October 11, 2024 and sell it today you would earn a total of 6.00 from holding Guangdong Investment Limited or generate 9.09% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Guangdong Investment Limited vs. Nomad Foods
Performance |
| Timeline |
| Guangdong Investment |
| Nomad Foods |
Guangdong Investment and Nomad Foods Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Guangdong Investment and Nomad Foods
The main advantage of trading using opposite Guangdong Investment and Nomad Foods positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Guangdong Investment position performs unexpectedly, Nomad Foods 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 Nomad Foods will offset losses from the drop in Nomad Foods' long position.The idea behind Guangdong Investment Limited and Nomad Foods pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.
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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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.
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