Correlation Between Nomad Foods and McCormick Company

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

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

Diversification Opportunities for Nomad Foods and McCormick Company

-0.22

Correlation Coefficient

Nomad Foods  McCormick Company

Very good diversification

The 3 months correlation between Nomad and McCormick is -0.22. Overlapping area represents the amount of risk that can be diversified away by holding Nomad Foods and McCormick Company Incorporated in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on McCormick Company and Nomad Foods 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 Nomad Foods are associated (or correlated) with McCormick Company. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of McCormick Company has no effect on the direction of Nomad Foods i.e., Nomad Foods and McCormick Company go up and down completely randomly.

Pair Corralation between Nomad Foods and McCormick Company

Given the investment horizon of 90 days Nomad Foods is expected to generate 0.91 times more return on investment than McCormick Company. However, Nomad Foods is 1.1 times less risky than McCormick Company. It trades about -0.28 of its potential returns per unit of risk. McCormick Company Incorporated is currently generating about -0.33 per unit of risk. If you would invest  1,892  in Nomad Foods on March 10, 2024 and sell it today you would lose (132.00) from holding Nomad Foods or give up 6.98% of portfolio value over 90 days.

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

Nomad Foods  vs.  McCormick Company Incorporated

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.

McCormick Company

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days McCormick Company Incorporated has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound forward-looking signals, McCormick Company is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Nomad Foods and McCormick Company

The main advantage of trading using opposite Nomad Foods and McCormick Company positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Nomad Foods position performs unexpectedly, McCormick Company 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 McCormick Company will offset losses from the drop in McCormick Company's long position.

The idea behind Nomad Foods and McCormick Company Incorporated 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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.