Correlation Between Philip Morris and Nomad Foods
Can any of the company-specific risk be diversified away by investing in both Philip Morris 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 Philip Morris and Nomad Foods into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Philip Morris International and Nomad Foods, you can compare the effects of market volatilities on Philip Morris 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 Philip Morris with a short position of Nomad Foods. Check out your portfolio center. Please also check ongoing floating volatility patterns of Philip Morris and Nomad Foods.
Diversification Opportunities for Philip Morris and Nomad Foods
-0.47 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Philip and Nomad is -0.47. Overlapping area represents the amount of risk that can be diversified away by holding Philip Morris International and Nomad Foods in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nomad Foods and Philip Morris 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 Philip Morris International 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 Philip Morris i.e., Philip Morris and Nomad Foods go up and down completely randomly.
Pair Corralation between Philip Morris and Nomad Foods
Allowing for the 90-day total investment horizon Philip Morris International is expected to generate 0.7 times more return on investment than Nomad Foods. However, Philip Morris International is 1.42 times less risky than Nomad Foods. It trades about 0.07 of its potential returns per unit of risk. Nomad Foods is currently generating about 0.01 per unit of risk. If you would invest 9,284 in Philip Morris International on August 27, 2024 and sell it today you would earn a total of 3,715 from holding Philip Morris International or generate 40.02% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Philip Morris International vs. Nomad Foods
Performance |
| Timeline |
| Philip Morris Intern |
| Nomad Foods |
Philip Morris and Nomad Foods Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Philip Morris and Nomad Foods
The main advantage of trading using opposite Philip Morris and Nomad Foods positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Philip Morris 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.| Philip Morris vs. British American Tobacco | Philip Morris vs. Universal | Philip Morris vs. Imperial Brands PLC | Philip Morris vs. Altria Group |
| Nomad Foods vs. Lancaster Colony | Nomad Foods vs. Treehouse Foods | Nomad Foods vs. John B Sanfilippo | Nomad Foods vs. Seneca Foods Corp |
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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.
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