Correlation Between SMA Solar and Nomad Foods
Can any of the company-specific risk be diversified away by investing in both SMA Solar 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 SMA Solar and Nomad Foods into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between SMA Solar Technology and Nomad Foods, you can compare the effects of market volatilities on SMA Solar 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 SMA Solar with a short position of Nomad Foods. Check out your portfolio center. Please also check ongoing floating volatility patterns of SMA Solar and Nomad Foods.
Diversification Opportunities for SMA Solar and Nomad Foods
-0.19 | Correlation Coefficient |
Good diversification
The 3 months correlation between SMA and Nomad is -0.19. Overlapping area represents the amount of risk that can be diversified away by holding SMA Solar Technology and Nomad Foods in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nomad Foods and SMA Solar 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 SMA Solar Technology 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 SMA Solar i.e., SMA Solar and Nomad Foods go up and down completely randomly.
Pair Corralation between SMA Solar and Nomad Foods
Assuming the 90 days horizon SMA Solar Technology is expected to under-perform the Nomad Foods. In addition to that, SMA Solar is 1.59 times more volatile than Nomad Foods. It trades about -0.09 of its total potential returns per unit of risk. Nomad Foods is currently generating about 0.07 per unit of volatility. If you would invest 1,580 in Nomad Foods on November 2, 2024 and sell it today you would earn a total of 40.00 from holding Nomad Foods or generate 2.53% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
SMA Solar Technology vs. Nomad Foods
Performance |
| Timeline |
| SMA Solar Technology |
| Nomad Foods |
SMA Solar and Nomad Foods Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with SMA Solar and Nomad Foods
The main advantage of trading using opposite SMA Solar and Nomad Foods positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if SMA Solar 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.| SMA Solar vs. CN DATANG C | SMA Solar vs. Cass Information Systems | SMA Solar vs. PRECISION DRILLING P | SMA Solar vs. Automatic Data Processing |
| Nomad Foods vs. Tower Semiconductor | Nomad Foods vs. IMPERIAL TOBACCO | Nomad Foods vs. Eastman Chemical | Nomad Foods vs. Nordic Semiconductor ASA |
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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.
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