Correlation Between Associated British and Emmi AG

Can any of the company-specific risk be diversified away by investing in both Associated British and Emmi AG 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 Emmi AG 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 Emmi AG, you can compare the effects of market volatilities on Associated British and Emmi AG 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 Emmi AG. Check out your portfolio center. Please also check ongoing floating volatility patterns of Associated British and Emmi AG.

Diversification Opportunities for Associated British and Emmi AG

-0.08

Correlation Coefficient

Associated British  Emmi AG

Good diversification

The 3 months correlation between Associated and Emmi is -0.08. Overlapping area represents the amount of risk that can be diversified away by holding Associated British Foods and Emmi AG in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Emmi AG 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 Emmi AG. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Emmi AG has no effect on the direction of Associated British i.e., Associated British and Emmi AG go up and down completely randomly.

Pair Corralation between Associated British and Emmi AG

Assuming the 90 days horizon Associated British Foods is expected to generate 1.28 times more return on investment than Emmi AG. However, Associated British is 1.28 times more volatile than Emmi AG. It trades about -0.02 of its potential returns per unit of risk. Emmi AG is currently generating about -0.13 per unit of risk. If you would invest  2,596  in Associated British Foods on December 21, 2024 and sell it today you would lose (77.00) from holding Associated British Foods or give up 2.97% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.33%
Values	Daily Returns

Associated British Foods  vs.  Emmi AG

Associated British Foods

Risk-Adjusted Performance

Very Weak

Over the last 90 days Associated British Foods has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong technical and fundamental indicators, Associated British is not utilizing all of its potentials. The newest stock price disturbance, may contribute to short-term losses for the investors.

Emmi AG

Risk-Adjusted Performance

Very Weak

Over the last 90 days Emmi AG has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak 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.

Pair Trading with Associated British and Emmi AG

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

The idea behind Associated British Foods and Emmi AG 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 ETF Categories module to list of ETF categories grouped based on various criteria, such as the investment strategy or type of investments.