Correlation Between Associated British and EVS Broadcast

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

By analyzing existing cross correlation between Associated British Foods and EVS Broadcast Equipment, you can compare the effects of market volatilities on Associated British and EVS Broadcast 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 Associated British with a short position of EVS Broadcast. Check out your portfolio center. Please also check ongoing floating volatility patterns of Associated British and EVS Broadcast.

Diversification Opportunities for Associated British and EVS Broadcast

-0.13

Correlation Coefficient

Associated British  EVS Broadcast

Good diversification

The 3 months correlation between Associated and EVS is -0.13. Overlapping area represents the amount of risk that can be diversified away by holding Associated British Foods and EVS Broadcast Equipment in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on EVS Broadcast Equipment and Associated British 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 Associated British Foods are associated (or correlated) with EVS Broadcast. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of EVS Broadcast Equipment has no effect on the direction of Associated British i.e., Associated British and EVS Broadcast go up and down completely randomly.

Pair Corralation between Associated British and EVS Broadcast

Assuming the 90 days trading horizon Associated British is expected to generate 1.77 times less return on investment than EVS Broadcast. But when comparing it to its historical volatility, Associated British Foods is 1.14 times less risky than EVS Broadcast. It trades about 0.03 of its potential returns per unit of risk. EVS Broadcast Equipment is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  2,893  in EVS Broadcast Equipment on September 12, 2024 and sell it today you would earn a total of  92.00  from holding EVS Broadcast Equipment or generate 3.18% return on investment over 90 days.

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

Associated British Foods  vs.  EVS Broadcast Equipment

Associated British Foods

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Associated British Foods are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound technical and fundamental indicators, Associated British is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

EVS Broadcast Equipment

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in EVS Broadcast Equipment are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, EVS Broadcast 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 Associated British and EVS Broadcast

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

The idea behind Associated British Foods and EVS Broadcast Equipment 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 Center module to all portfolio management and optimization tools to improve performance of your portfolios.