Correlation Between Ebro Foods and Primary Health

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

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

Diversification Opportunities for Ebro Foods and Primary Health

0.06

Correlation Coefficient

Ebro Foods  Primary Health

Significant diversification

The 3 months correlation between Ebro and Primary is 0.06. Overlapping area represents the amount of risk that can be diversified away by holding Ebro Foods and Primary Health Properties in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Primary Health Properties 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 Primary Health. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Primary Health Properties has no effect on the direction of Ebro Foods i.e., Ebro Foods and Primary Health go up and down completely randomly.

Pair Corralation between Ebro Foods and Primary Health

Assuming the 90 days trading horizon Ebro Foods is expected to generate 0.55 times more return on investment than Primary Health. However, Ebro Foods is 1.82 times less risky than Primary Health. It trades about -0.01 of its potential returns per unit of risk. Primary Health Properties is currently generating about -0.13 per unit of risk. If you would invest  1,586  in Ebro Foods on September 29, 2024 and sell it today you would lose (9.00) from holding Ebro Foods or give up 0.57% of portfolio value over 90 days.

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

Ebro Foods  vs.  Primary Health Properties

Ebro Foods

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Ebro Foods has generated negative risk-adjusted returns adding no value to investors with long positions. 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.

Primary Health Properties

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Primary Health Properties has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest uncertain performance, the Stock's technical and fundamental indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

Pair Trading with Ebro Foods and Primary Health

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

The idea behind Ebro Foods and Primary Health Properties 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.