Correlation Between Ebro Foods and Cars

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

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

Diversification Opportunities for Ebro Foods and Cars

-0.63

Correlation Coefficient

Ebro Foods  Cars

Excellent diversification

The 3 months correlation between Ebro and Cars is -0.63. Overlapping area represents the amount of risk that can be diversified away by holding Ebro Foods and Cars Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cars Inc and Ebro 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 Ebro Foods are associated (or correlated) with Cars. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cars Inc has no effect on the direction of Ebro Foods i.e., Ebro Foods and Cars go up and down completely randomly.

Pair Corralation between Ebro Foods and Cars

Assuming the 90 days trading horizon Ebro Foods is expected to generate 0.17 times more return on investment than Cars. However, Ebro Foods is 5.97 times less risky than Cars. It trades about 0.02 of its potential returns per unit of risk. Cars Inc is currently generating about -0.06 per unit of risk. If you would invest  1,567  in Ebro Foods on September 28, 2024 and sell it today you would earn a total of  21.00  from holding Ebro Foods or generate 1.34% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	57.55%
Values	Daily Returns

Ebro Foods  vs.  Cars Inc

Ebro Foods

Risk-Adjusted Performance

0 of 100

Weak

Over the last 90 days Ebro Foods has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Ebro Foods is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Cars Inc

Risk-Adjusted Performance

0 of 100

Insignificant

Over the last 90 days Cars Inc has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively uncertain basic indicators, Cars may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Ebro Foods and Cars

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

The idea behind Ebro Foods and Cars Inc 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 Earnings Calls module to check upcoming earnings announcements updated hourly across public exchanges.