Correlation Between Ebro Foods and OneSavings Bank

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

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

Diversification Opportunities for Ebro Foods and OneSavings Bank

0.74

Correlation Coefficient

Ebro Foods  OneSavings Bank

Poor diversification

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

Pair Corralation between Ebro Foods and OneSavings Bank

Assuming the 90 days trading horizon Ebro Foods is expected to generate 2.27 times less return on investment than OneSavings Bank. But when comparing it to its historical volatility, Ebro Foods is 3.48 times less risky than OneSavings Bank. It trades about 0.18 of its potential returns per unit of risk. OneSavings Bank PLC is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest  37,750  in OneSavings Bank PLC on December 29, 2024 and sell it today you would earn a total of  5,790  from holding OneSavings Bank PLC or generate 15.34% 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.  OneSavings Bank 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.

OneSavings Bank PLC

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in OneSavings Bank PLC are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of rather uncertain technical and fundamental indicators, OneSavings Bank exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Ebro Foods and OneSavings Bank

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

The idea behind Ebro Foods and OneSavings Bank 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.

Check out your portfolio center.

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 Portfolio Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.