Correlation Between Ebro Foods and DAIRY FARM

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

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

Diversification Opportunities for Ebro Foods and DAIRY FARM

0.2

Correlation Coefficient

Ebro Foods  DAIRY FARM

Modest diversification

The 3 months correlation between Ebro and DAIRY is 0.2. Overlapping area represents the amount of risk that can be diversified away by holding Ebro Foods SA and DAIRY FARM INTL in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on DAIRY FARM INTL 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 SA are associated (or correlated) with DAIRY FARM. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of DAIRY FARM INTL has no effect on the direction of Ebro Foods i.e., Ebro Foods and DAIRY FARM go up and down completely randomly.

Pair Corralation between Ebro Foods and DAIRY FARM

Assuming the 90 days horizon Ebro Foods is expected to generate 22.92 times less return on investment than DAIRY FARM. But when comparing it to its historical volatility, Ebro Foods SA is 2.7 times less risky than DAIRY FARM. It trades about 0.02 of its potential returns per unit of risk. DAIRY FARM INTL is currently generating about 0.19 of returns per unit of risk over similar time horizon. If you would invest  168.00  in DAIRY FARM INTL on September 19, 2024 and sell it today you would earn a total of  52.00  from holding DAIRY FARM INTL or generate 30.95% return on investment over 90 days.

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

Ebro Foods SA  vs.  DAIRY FARM INTL

Ebro Foods SA

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Ebro Foods SA are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, Ebro Foods is not utilizing all of its potentials. The newest stock price disturbance, may contribute to mid-run losses for the stockholders.

DAIRY FARM INTL

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in DAIRY FARM INTL are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively fragile basic indicators, DAIRY FARM unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Ebro Foods and DAIRY FARM

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

The idea behind Ebro Foods SA and DAIRY FARM INTL 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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.