Correlation Between TESCO PLC and Nomad Foods
Can any of the company-specific risk be diversified away by investing in both TESCO PLC 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 TESCO PLC and Nomad Foods into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between TESCO PLC LS 0633333 and Nomad Foods, you can compare the effects of market volatilities on TESCO PLC 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 TESCO PLC with a short position of Nomad Foods. Check out your portfolio center. Please also check ongoing floating volatility patterns of TESCO PLC and Nomad Foods.
Diversification Opportunities for TESCO PLC and Nomad Foods
0.66 | Correlation Coefficient |
Poor diversification
The 3 months correlation between TESCO and Nomad is 0.66. Overlapping area represents the amount of risk that can be diversified away by holding TESCO PLC LS 0633333 and Nomad Foods in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nomad Foods and TESCO PLC 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 TESCO PLC LS 0633333 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 TESCO PLC i.e., TESCO PLC and Nomad Foods go up and down completely randomly.
Pair Corralation between TESCO PLC and Nomad Foods
Assuming the 90 days trading horizon TESCO PLC LS 0633333 is expected to generate 0.92 times more return on investment than Nomad Foods. However, TESCO PLC LS 0633333 is 1.09 times less risky than Nomad Foods. It trades about 0.08 of its potential returns per unit of risk. Nomad Foods is currently generating about 0.02 per unit of risk. If you would invest 246.00 in TESCO PLC LS 0633333 on September 4, 2024 and sell it today you would earn a total of 190.00 from holding TESCO PLC LS 0633333 or generate 77.24% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 99.8% |
| Values | Daily Returns |
TESCO PLC LS 0633333 vs. Nomad Foods
Performance |
| Timeline |
| TESCO PLC LS |
| Nomad Foods |
TESCO PLC and Nomad Foods Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with TESCO PLC and Nomad Foods
The main advantage of trading using opposite TESCO PLC and Nomad Foods positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if TESCO PLC 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.| TESCO PLC vs. Seven i Holdings | TESCO PLC vs. AHOLD DELHAIADR16 EO 25 | TESCO PLC vs. Loblaw Companies Limited |
| Nomad Foods vs. Apple Inc | Nomad Foods vs. Apple Inc | Nomad Foods vs. Apple Inc | Nomad Foods vs. Apple Inc |
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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.
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