Correlation Between Hansa Investment and Ebro Foods

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

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

Diversification Opportunities for Hansa Investment and Ebro Foods

0.35

Correlation Coefficient

Hansa Investment  Ebro Foods

Weak diversification

The 3 months correlation between Hansa and Ebro is 0.35. Overlapping area represents the amount of risk that can be diversified away by holding Hansa Investment and Ebro Foods in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ebro Foods and Hansa Investment 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 Hansa Investment 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 has no effect on the direction of Hansa Investment i.e., Hansa Investment and Ebro Foods go up and down completely randomly.

Pair Corralation between Hansa Investment and Ebro Foods

Assuming the 90 days trading horizon Hansa Investment is expected to generate 7.11 times less return on investment than Ebro Foods. In addition to that, Hansa Investment is 2.79 times more volatile than Ebro Foods. It trades about 0.0 of its total potential returns per unit of risk. Ebro Foods is currently generating about 0.04 per unit of volatility. If you would invest  1,584  in Ebro Foods on September 4, 2024 and sell it today you would earn a total of  19.00  from holding Ebro Foods or generate 1.2% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	98.46%
Values	Daily Returns

Hansa Investment  vs.  Ebro Foods

Hansa Investment

Risk-Adjusted Performance

0 of 100

Very Weak

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

Ebro Foods

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Ebro Foods are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, Ebro Foods is not utilizing all of its potentials. The latest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Hansa Investment and Ebro Foods

The main advantage of trading using opposite Hansa Investment and Ebro Foods positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Hansa Investment 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 Hansa Investment and Ebro 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.