Correlation Between Real Good and Nomad Foods

Can any of the company-specific risk be diversified away by investing in both Real Good 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 Real Good and Nomad Foods into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Real Good Food and Nomad Foods, you can compare the effects of market volatilities on Real Good 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 Real Good with a short position of Nomad Foods. Check out your portfolio center. Please also check ongoing floating volatility patterns of Real Good and Nomad Foods.

Diversification Opportunities for Real Good and Nomad Foods

0.56

Correlation Coefficient

Real Good  Nomad Foods

Very weak diversification

The 3 months correlation between Real and Nomad is 0.56. Overlapping area represents the amount of risk that can be diversified away by holding Real Good Food and Nomad Foods in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nomad Foods and Real Good 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 Real Good Food 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 Real Good i.e., Real Good and Nomad Foods go up and down completely randomly.

Pair Corralation between Real Good and Nomad Foods

Considering the 90-day investment horizon Real Good Food is expected to under-perform the Nomad Foods. In addition to that, Real Good is 3.24 times more volatile than Nomad Foods. It trades about -0.16 of its total potential returns per unit of risk. Nomad Foods is currently generating about -0.11 per unit of volatility. If you would invest  1,883  in Nomad Foods on September 23, 2024 and sell it today you would lose (201.00) from holding Nomad Foods or give up 10.67% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	100.0%
Values	Daily Returns

Real Good Food  vs.  Nomad Foods

Real Good Food

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Real Good Food has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's technical and fundamental indicators remain nearly stable which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Nomad Foods

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Nomad Foods has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest fragile performance, the Stock's primary indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

Pair Trading with Real Good and Nomad Foods

The main advantage of trading using opposite Real Good and Nomad Foods positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Real Good 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 Real Good Food 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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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 ETFs module to find actively traded Exchange Traded Funds (ETF) from around the world.