Correlation Between Ebro Foods and ResMed

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

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

Diversification Opportunities for Ebro Foods and ResMed

-0.32

Correlation Coefficient

Ebro Foods  ResMed

Very good diversification

The 3 months correlation between Ebro and ResMed is -0.32. Overlapping area represents the amount of risk that can be diversified away by holding Ebro Foods SA and ResMed Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ResMed Inc 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 SA are associated (or correlated) with ResMed. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ResMed Inc has no effect on the direction of Ebro Foods i.e., Ebro Foods and ResMed go up and down completely randomly.

Pair Corralation between Ebro Foods and ResMed

Assuming the 90 days horizon Ebro Foods SA is expected to generate 0.46 times more return on investment than ResMed. However, Ebro Foods SA is 2.17 times less risky than ResMed. It trades about 0.07 of its potential returns per unit of risk. ResMed Inc is currently generating about -0.06 per unit of risk. If you would invest  1,574  in Ebro Foods SA on December 20, 2024 and sell it today you would earn a total of  62.00  from holding Ebro Foods SA or generate 3.94% return on investment over 90 days.

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

Ebro Foods SA  vs.  ResMed Inc

Ebro Foods SA

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Ebro Foods SA are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, Ebro Foods is not utilizing all of its potentials. The latest stock price disturbance, may contribute to mid-run losses for the stockholders.

ResMed Inc

Risk-Adjusted Performance

Very Weak

Over the last 90 days ResMed Inc 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 Ebro Foods and ResMed

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

The idea behind Ebro Foods SA and ResMed Inc 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 Transaction History module to view history of all your transactions and understand their impact on performance.