Correlation Between Ebro Foods and Hansa Trust

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

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

Diversification Opportunities for Ebro Foods and Hansa Trust

-0.08

Correlation Coefficient

Ebro Foods  Hansa Trust

Good diversification

The 3 months correlation between Ebro and Hansa is -0.08. Overlapping area represents the amount of risk that can be diversified away by holding Ebro Foods and Hansa Trust in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hansa Trust 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 Hansa Trust. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hansa Trust has no effect on the direction of Ebro Foods i.e., Ebro Foods and Hansa Trust go up and down completely randomly.

Pair Corralation between Ebro Foods and Hansa Trust

Assuming the 90 days trading horizon Ebro Foods is expected to generate 0.58 times more return on investment than Hansa Trust. However, Ebro Foods is 1.71 times less risky than Hansa Trust. It trades about 0.18 of its potential returns per unit of risk. Hansa Trust is currently generating about -0.04 per unit of risk. If you would invest  1,578  in Ebro Foods on December 29, 2024 and sell it today you would earn a total of  110.00  from holding Ebro Foods or generate 6.97% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.46%
Values	Daily Returns

Ebro Foods  vs.  Hansa Trust

Ebro Foods

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Ebro Foods are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak basic indicators, Ebro Foods may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Hansa Trust

Risk-Adjusted Performance

Very Weak

Over the last 90 days Hansa Trust has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound technical and fundamental indicators, Hansa Trust 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 Hansa Trust

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

The idea behind Ebro Foods and Hansa Trust 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 Pattern Recognition module to use different Pattern Recognition models to time the market across multiple global exchanges.