Correlation Between Ebro Foods and Surgical Science

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

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

Diversification Opportunities for Ebro Foods and Surgical Science

0.11

Correlation Coefficient

Ebro Foods  Surgical Science

Average diversification

The 3 months correlation between Ebro and Surgical is 0.11. Overlapping area represents the amount of risk that can be diversified away by holding Ebro Foods and Surgical Science Sweden in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Surgical Science Sweden 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 Surgical Science. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Surgical Science Sweden has no effect on the direction of Ebro Foods i.e., Ebro Foods and Surgical Science go up and down completely randomly.

Pair Corralation between Ebro Foods and Surgical Science

Assuming the 90 days trading horizon Ebro Foods is expected to generate 32.76 times less return on investment than Surgical Science. But when comparing it to its historical volatility, Ebro Foods is 5.65 times less risky than Surgical Science. It trades about 0.03 of its potential returns per unit of risk. Surgical Science Sweden is currently generating about 0.15 of returns per unit of risk over similar time horizon. If you would invest  11,680  in Surgical Science Sweden on September 3, 2024 and sell it today you would earn a total of  3,270  from holding Surgical Science Sweden or generate 28.0% return on investment over 90 days.

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

Ebro Foods  vs.  Surgical Science Sweden

Ebro Foods

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Ebro Foods are ranked lower than 1 (%) 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 newest stock price uproar, may contribute to short-horizon losses for the private investors.

Surgical Science Sweden

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Surgical Science Sweden are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Surgical Science unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Ebro Foods and Surgical Science

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

The idea behind Ebro Foods and Surgical Science Sweden 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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.