Correlation Between Ebro Foods and 3I Group

Can any of the company-specific risk be diversified away by investing in both Ebro Foods and 3I Group 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 3I Group into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Ebro Foods and 3I Group PLC, you can compare the effects of market volatilities on Ebro Foods and 3I Group 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 3I Group. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ebro Foods and 3I Group.

Diversification Opportunities for Ebro Foods and 3I Group

-0.41

Correlation Coefficient

Ebro Foods  3I Group

Very good diversification

The 3 months correlation between Ebro and III is -0.41. Overlapping area represents the amount of risk that can be diversified away by holding Ebro Foods and 3I Group PLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on 3I Group PLC 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 3I Group. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of 3I Group PLC has no effect on the direction of Ebro Foods i.e., Ebro Foods and 3I Group go up and down completely randomly.

Pair Corralation between Ebro Foods and 3I Group

Assuming the 90 days trading horizon Ebro Foods is expected to under-perform the 3I Group. But the stock apears to be less risky and, when comparing its historical volatility, Ebro Foods is 2.2 times less risky than 3I Group. The stock trades about -0.03 of its potential returns per unit of risk. The 3I Group PLC is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest  342,037  in 3I Group PLC on October 8, 2024 and sell it today you would earn a total of  18,363  from holding 3I Group PLC or generate 5.37% return on investment over 90 days.

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

Ebro Foods  vs.  3I Group PLC

Ebro Foods

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Ebro Foods are ranked lower than 2 (%) 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.

3I Group PLC

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in 3I Group PLC are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady technical and fundamental indicators, 3I Group exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Ebro Foods and 3I Group

The main advantage of trading using opposite Ebro Foods and 3I Group positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ebro Foods position performs unexpectedly, 3I Group 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 3I Group will offset losses from the drop in 3I Group's long position.

The idea behind Ebro Foods and 3I Group PLC 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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.