Correlation Between EuropaCorp and ASSOC BR

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

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

Diversification Opportunities for EuropaCorp and ASSOC BR

0.6

Correlation Coefficient

EuropaCorp  ASSOC BR

Poor diversification

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

Pair Corralation between EuropaCorp and ASSOC BR

Assuming the 90 days horizon EuropaCorp is expected to under-perform the ASSOC BR. In addition to that, EuropaCorp is 3.2 times more volatile than ASSOC BR FOODS. It trades about -0.03 of its total potential returns per unit of risk. ASSOC BR FOODS is currently generating about 0.03 per unit of volatility. 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

EuropaCorp  vs.  ASSOC BR FOODS

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.

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.

Pair Trading with EuropaCorp and ASSOC BR

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

The idea behind EuropaCorp and ASSOC BR FOODS 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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.