Correlation Between Bankinter and Ebro Foods

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

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

Diversification Opportunities for Bankinter and Ebro Foods

0.64

Correlation Coefficient

Bankinter  Ebro Foods

Poor diversification

The 3 months correlation between Bankinter and Ebro is 0.64. Overlapping area represents the amount of risk that can be diversified away by holding Bankinter and Ebro Foods in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ebro Foods and Bankinter 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 Bankinter are associated (or correlated) with Ebro Foods. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ebro Foods has no effect on the direction of Bankinter i.e., Bankinter and Ebro Foods go up and down completely randomly.

Pair Corralation between Bankinter and Ebro Foods

Assuming the 90 days trading horizon Bankinter is expected to generate 2.67 times more return on investment than Ebro Foods. However, Bankinter is 2.67 times more volatile than Ebro Foods. It trades about 0.31 of its potential returns per unit of risk. Ebro Foods is currently generating about 0.2 per unit of risk. If you would invest  761.00  in Bankinter on December 30, 2024 and sell it today you would earn a total of  276.00  from holding Bankinter or generate 36.27% return on investment over 90 days.

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

Bankinter  vs.  Ebro Foods

Bankinter

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Bankinter are ranked lower than 24 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady basic indicators, Bankinter exhibited solid returns over the last few months and may actually be approaching a breakup point.

Ebro Foods

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Ebro Foods are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady fundamental indicators, Ebro Foods may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Bankinter and Ebro Foods

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

The idea behind Bankinter and Ebro 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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.