Correlation Between Ebro Foods and Neometals

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

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

Diversification Opportunities for Ebro Foods and Neometals

-0.1

Correlation Coefficient

Ebro Foods  Neometals

Good diversification

The 3 months correlation between Ebro and Neometals is -0.1. Overlapping area represents the amount of risk that can be diversified away by holding Ebro Foods and Neometals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Neometals 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 Neometals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Neometals has no effect on the direction of Ebro Foods i.e., Ebro Foods and Neometals go up and down completely randomly.

Pair Corralation between Ebro Foods and Neometals

Assuming the 90 days trading horizon Ebro Foods is expected to generate 0.07 times more return on investment than Neometals. However, Ebro Foods is 14.27 times less risky than Neometals. It trades about 0.02 of its potential returns per unit of risk. Neometals is currently generating about -0.26 per unit of risk. If you would invest  1,583  in Ebro Foods on September 22, 2024 and sell it today you would earn a total of  4.00  from holding Ebro Foods or generate 0.25% return on investment over 90 days.

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

Ebro Foods  vs.  Neometals

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.

Neometals

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Neometals has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of uncertain performance in the last few months, the Stock's technical and fundamental indicators remain rather sound which may send shares a bit higher in January 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Pair Trading with Ebro Foods and Neometals

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

The idea behind Ebro Foods and Neometals 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 Transaction History module to view history of all your transactions and understand their impact on performance.