Correlation Between Ebro Foods and Brooks Macdonald

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

By analyzing existing cross correlation between Ebro Foods and Brooks Macdonald Group, you can compare the effects of market volatilities on Ebro Foods and Brooks Macdonald 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 Brooks Macdonald. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ebro Foods and Brooks Macdonald.

Diversification Opportunities for Ebro Foods and Brooks Macdonald

-0.25

Correlation Coefficient

Ebro Foods  Brooks Macdonald

Very good diversification

The 3 months correlation between Ebro and Brooks is -0.25. Overlapping area represents the amount of risk that can be diversified away by holding Ebro Foods and Brooks Macdonald Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Brooks Macdonald 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 Brooks Macdonald. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Brooks Macdonald has no effect on the direction of Ebro Foods i.e., Ebro Foods and Brooks Macdonald go up and down completely randomly.

Pair Corralation between Ebro Foods and Brooks Macdonald

Assuming the 90 days trading horizon Ebro Foods is expected to generate 0.17 times more return on investment than Brooks Macdonald. However, Ebro Foods is 6.01 times less risky than Brooks Macdonald. It trades about -0.02 of its potential returns per unit of risk. Brooks Macdonald Group is currently generating about -0.03 per unit of risk. If you would invest  1,592  in Ebro Foods on September 17, 2024 and sell it today you would lose (14.00) from holding Ebro Foods or give up 0.88% of portfolio value over 90 days.

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

Ebro Foods  vs.  Brooks Macdonald Group

Ebro Foods

Risk-Adjusted Performance

0 of 100

Very 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.

Brooks Macdonald

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Brooks Macdonald Group has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound technical and fundamental indicators, Brooks Macdonald is not utilizing all of its potentials. The newest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Ebro Foods and Brooks Macdonald

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

The idea behind Ebro Foods and Brooks Macdonald Group 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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.