Correlation Between Ebro Foods and TC Energy

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

Diversification Opportunities for Ebro Foods and TC Energy

0.04

Correlation Coefficient

Ebro Foods  TC Energy

Significant diversification

The 3 months correlation between Ebro and TRS is 0.04. Overlapping area represents the amount of risk that can be diversified away by holding Ebro Foods SA and TC Energy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on TC Energy 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 TC Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of TC Energy has no effect on the direction of Ebro Foods i.e., Ebro Foods and TC Energy go up and down completely randomly.

Pair Corralation between Ebro Foods and TC Energy

Assuming the 90 days horizon Ebro Foods is expected to generate 7.86 times less return on investment than TC Energy. But when comparing it to its historical volatility, Ebro Foods SA is 1.35 times less risky than TC Energy. It trades about 0.02 of its potential returns per unit of risk. TC Energy is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest  2,862  in TC Energy on September 26, 2024 and sell it today you would earn a total of  1,487  from holding TC Energy or generate 51.96% return on investment over 90 days.

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

Ebro Foods SA  vs.  TC Energy

Ebro Foods SA

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Ebro Foods SA has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Ebro Foods is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

TC Energy

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in TC Energy are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, TC Energy reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Ebro Foods and TC Energy

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

The idea behind Ebro Foods SA and TC Energy 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 Stock Screener module to find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook..