Correlation Between EBRO FOODS and Rock Tech

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

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

Diversification Opportunities for EBRO FOODS and Rock Tech

0.32

Correlation Coefficient

EBRO FOODS  Rock Tech

Weak diversification

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

Pair Corralation between EBRO FOODS and Rock Tech

Assuming the 90 days trading horizon EBRO FOODS is expected to generate 0.31 times more return on investment than Rock Tech. However, EBRO FOODS is 3.27 times less risky than Rock Tech. It trades about 0.03 of its potential returns per unit of risk. Rock Tech Lithium is currently generating about -0.02 per unit of risk. If you would invest  1,354  in EBRO FOODS on September 19, 2024 and sell it today you would earn a total of  236.00  from holding EBRO FOODS or generate 17.43% return on investment over 90 days.

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

EBRO FOODS  vs.  Rock Tech Lithium

EBRO FOODS

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in EBRO FOODS are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. 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.

Rock Tech Lithium

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Rock Tech Lithium 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 forward indicators remain nearly stable which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with EBRO FOODS and Rock Tech

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

The idea behind EBRO FOODS and Rock Tech Lithium 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.