Correlation Between Post Holdings and Nomad Foods

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

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

Diversification Opportunities for Post Holdings and Nomad Foods

0.81

Correlation Coefficient

Post Holdings  Nomad Foods

Very poor diversification

The 3 months correlation between Post and Nomad is 0.81. Overlapping area represents the amount of risk that can be diversified away by holding Post Holdings and Nomad Foods in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nomad Foods and Post Holdings 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 Post Holdings 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 Post Holdings i.e., Post Holdings and Nomad Foods go up and down completely randomly.

Pair Corralation between Post Holdings and Nomad Foods

Given the investment horizon of 90 days Post Holdings is expected to generate 2.18 times less return on investment than Nomad Foods. But when comparing it to its historical volatility, Post Holdings is 1.11 times less risky than Nomad Foods. It trades about 0.1 of its potential returns per unit of risk. Nomad Foods is currently generating about 0.2 of returns per unit of risk over similar time horizon. If you would invest  1,566  in Nomad Foods on January 11, 2025 and sell it today you would earn a total of  349.00  from holding Nomad Foods or generate 22.29% return on investment over 90 days.

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

Post Holdings  vs.  Nomad Foods

Post Holdings

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Post Holdings are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively conflicting basic indicators, Post Holdings may actually be approaching a critical reversion point that can send shares even higher in May 2025.

Nomad Foods

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Nomad Foods are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady primary indicators, Nomad Foods exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Post Holdings and Nomad Foods

The main advantage of trading using opposite Post Holdings and Nomad Foods positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Post Holdings 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 Post Holdings 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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.