Correlation Between ASSOC BR and EuropaCorp

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

By analyzing existing cross correlation between ASSOC BR FOODS and EuropaCorp, you can compare the effects of market volatilities on ASSOC BR and EuropaCorp 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 ASSOC BR with a short position of EuropaCorp. Check out your portfolio center. Please also check ongoing floating volatility patterns of ASSOC BR and EuropaCorp.

Diversification Opportunities for ASSOC BR and EuropaCorp

0.6

Correlation Coefficient

ASSOC BR  EuropaCorp

Poor diversification

The 3 months correlation between ASSOC and EuropaCorp is 0.6. Overlapping area represents the amount of risk that can be diversified away by holding ASSOC BR FOODS and EuropaCorp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on EuropaCorp and ASSOC BR 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 ASSOC BR FOODS are associated (or correlated) with EuropaCorp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of EuropaCorp has no effect on the direction of ASSOC BR i.e., ASSOC BR and EuropaCorp go up and down completely randomly.

Pair Corralation between ASSOC BR and EuropaCorp

Assuming the 90 days trading horizon ASSOC BR FOODS is expected to generate 0.31 times more return on investment than EuropaCorp. However, ASSOC BR FOODS is 3.2 times less risky than EuropaCorp. It trades about 0.03 of its potential returns per unit of risk. EuropaCorp is currently generating about -0.03 per unit of risk. If you would invest  2,154  in ASSOC BR FOODS on October 4, 2024 and sell it today you would earn a total of  286.00  from holding ASSOC BR FOODS or generate 13.28% return on investment over 90 days.

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

ASSOC BR FOODS  vs.  EuropaCorp

ASSOC BR FOODS

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days ASSOC BR FOODS has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest fragile performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

EuropaCorp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days EuropaCorp has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fragile performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with ASSOC BR and EuropaCorp

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

The idea behind ASSOC BR FOODS and EuropaCorp 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 Stocks Directory module to find actively traded stocks across global markets.