Correlation Between Boston Beer and Nomad Foods

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

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

Diversification Opportunities for Boston Beer and Nomad Foods

-0.74

Correlation Coefficient

Boston Beer  Nomad Foods

Pay attention - limited upside

The 3 months correlation between Boston and Nomad is -0.74. Overlapping area represents the amount of risk that can be diversified away by holding Boston Beer and Nomad Foods in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nomad Foods and Boston Beer 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 Boston Beer 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 Boston Beer i.e., Boston Beer and Nomad Foods go up and down completely randomly.

Pair Corralation between Boston Beer and Nomad Foods

Considering the 90-day investment horizon Boston Beer is expected to generate 1.07 times more return on investment than Nomad Foods. However, Boston Beer is 1.07 times more volatile than Nomad Foods. It trades about 0.12 of its potential returns per unit of risk. Nomad Foods is currently generating about -0.04 per unit of risk. If you would invest  28,007  in Boston Beer on August 31, 2024 and sell it today you would earn a total of  3,361  from holding Boston Beer or generate 12.0% return on investment over 90 days.

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

Boston Beer  vs.  Nomad Foods

Boston Beer

Risk-Adjusted Performance

9 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Boston Beer are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of very unsteady basic indicators, Boston Beer may actually be approaching a critical reversion point that can send shares even higher in December 2024.

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 rather sound primary indicators, Nomad Foods is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Boston Beer and Nomad Foods

The main advantage of trading using opposite Boston Beer and Nomad Foods positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Boston Beer 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 Boston Beer 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.

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 Portfolio Dashboard module to portfolio dashboard that provides centralized access to all your investments.