Correlation Between Ebro Foods and Mitie Group

Can any of the company-specific risk be diversified away by investing in both Ebro Foods and Mitie 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 Mitie 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 Mitie Group PLC, you can compare the effects of market volatilities on Ebro Foods and Mitie 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 Mitie Group. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ebro Foods and Mitie Group.

Diversification Opportunities for Ebro Foods and Mitie Group

0.72

Correlation Coefficient

Ebro Foods  Mitie Group

Poor diversification

The 3 months correlation between Ebro and Mitie is 0.72. Overlapping area represents the amount of risk that can be diversified away by holding Ebro Foods and Mitie Group PLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Mitie 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 Mitie Group. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Mitie Group PLC has no effect on the direction of Ebro Foods i.e., Ebro Foods and Mitie Group go up and down completely randomly.

Pair Corralation between Ebro Foods and Mitie Group

Assuming the 90 days trading horizon Ebro Foods is expected to generate 0.48 times more return on investment than Mitie Group. However, Ebro Foods is 2.1 times less risky than Mitie Group. It trades about 0.18 of its potential returns per unit of risk. Mitie Group PLC is currently generating about 0.08 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 Together
Strength	Significant
Accuracy	100.0%
Values	Daily Returns

Ebro Foods  vs.  Mitie Group PLC

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 uncertain basic indicators, Ebro Foods may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Mitie Group PLC

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Mitie Group PLC are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound technical and fundamental indicators, Mitie Group 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 Mitie Group

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

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