Correlation Between Ebro Foods and Monks Investment

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

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

Diversification Opportunities for Ebro Foods and Monks Investment

0.74

Correlation Coefficient

Ebro Foods  Monks Investment

Poor diversification

The 3 months correlation between Ebro and Monks is 0.74. Overlapping area represents the amount of risk that can be diversified away by holding Ebro Foods and Monks Investment Trust in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Monks Investment 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 Monks Investment. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Monks Investment Trust has no effect on the direction of Ebro Foods i.e., Ebro Foods and Monks Investment go up and down completely randomly.

Pair Corralation between Ebro Foods and Monks Investment

Assuming the 90 days trading horizon Ebro Foods is expected to generate 0.55 times more return on investment than Monks Investment. However, Ebro Foods is 1.82 times less risky than Monks Investment. It trades about 0.13 of its potential returns per unit of risk. Monks Investment Trust is currently generating about 0.04 per unit of risk. If you would invest  1,603  in Ebro Foods on November 29, 2024 and sell it today you would earn a total of  76.00  from holding Ebro Foods or generate 4.74% return on investment over 90 days.

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

Ebro Foods  vs.  Monks Investment Trust

Ebro Foods

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Ebro Foods are ranked lower than 10 (%) 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.

Monks Investment Trust

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Monks Investment Trust are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, Monks Investment 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 Ebro Foods and Monks Investment

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

The idea behind Ebro Foods and Monks Investment 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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.