Correlation Between EBRO FOODS and Pentair Plc

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

By analyzing existing cross correlation between EBRO FOODS and Pentair plc, you can compare the effects of market volatilities on EBRO FOODS and Pentair Plc 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 Pentair Plc. Check out your portfolio center. Please also check ongoing floating volatility patterns of EBRO FOODS and Pentair Plc.

Diversification Opportunities for EBRO FOODS and Pentair Plc

-0.11

Correlation Coefficient

EBRO FOODS  Pentair Plc

Good diversification

The 3 months correlation between EBRO and Pentair is -0.11. Overlapping area represents the amount of risk that can be diversified away by holding EBRO FOODS and Pentair plc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pentair plc 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 are associated (or correlated) with Pentair Plc. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Pentair plc has no effect on the direction of EBRO FOODS i.e., EBRO FOODS and Pentair Plc go up and down completely randomly.

Pair Corralation between EBRO FOODS and Pentair Plc

Assuming the 90 days trading horizon EBRO FOODS is expected to generate 0.35 times more return on investment than Pentair Plc. However, EBRO FOODS is 2.85 times less risky than Pentair Plc. It trades about -0.18 of its potential returns per unit of risk. Pentair plc is currently generating about -0.19 per unit of risk. If you would invest  1,590  in EBRO FOODS on September 29, 2024 and sell it today you would lose (28.00) from holding EBRO FOODS or give up 1.76% of portfolio value over 90 days.

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

EBRO FOODS  vs.  Pentair plc

EBRO FOODS

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days EBRO FOODS has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, EBRO FOODS is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Pentair plc

Risk-Adjusted Performance

12 of 100

Good

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

Pair Trading with EBRO FOODS and Pentair Plc

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

The idea behind EBRO FOODS and Pentair plc 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 Portfolio Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.