Correlation Between COFCO Joycome and Ebro Foods

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

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

Diversification Opportunities for COFCO Joycome and Ebro Foods

0.08

Correlation Coefficient

COFCO Joycome  Ebro Foods

Significant diversification

The 3 months correlation between COFCO and Ebro is 0.08. Overlapping area represents the amount of risk that can be diversified away by holding COFCO Joycome Foods and Ebro Foods SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ebro Foods SA and COFCO Joycome 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 COFCO Joycome Foods are associated (or correlated) with Ebro Foods. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ebro Foods SA has no effect on the direction of COFCO Joycome i.e., COFCO Joycome and Ebro Foods go up and down completely randomly.

Pair Corralation between COFCO Joycome and Ebro Foods

Assuming the 90 days horizon COFCO Joycome Foods is expected to generate 5.09 times more return on investment than Ebro Foods. However, COFCO Joycome is 5.09 times more volatile than Ebro Foods SA. It trades about 0.11 of its potential returns per unit of risk. Ebro Foods SA is currently generating about -0.14 per unit of risk. If you would invest  16.00  in COFCO Joycome Foods on September 24, 2024 and sell it today you would earn a total of  1.00  from holding COFCO Joycome Foods or generate 6.25% return on investment over 90 days.

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

COFCO Joycome Foods  vs.  Ebro Foods SA

COFCO Joycome Foods

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in COFCO Joycome Foods are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, COFCO Joycome reported solid returns over the last few months and may actually be approaching a breakup point.

Ebro Foods SA

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Ebro Foods SA has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Ebro Foods is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with COFCO Joycome and Ebro Foods

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

The idea behind COFCO Joycome Foods and Ebro Foods SA 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 Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.