Correlation Between National Retail and Ebro Foods

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

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

Diversification Opportunities for National Retail and Ebro Foods

-0.07

Correlation Coefficient

National Retail  Ebro Foods

Good diversification

The 3 months correlation between National and Ebro is -0.07. Overlapping area represents the amount of risk that can be diversified away by holding National Retail Properties and Ebro Foods SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ebro Foods SA and National Retail 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 National Retail Properties 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 SA has no effect on the direction of National Retail i.e., National Retail and Ebro Foods go up and down completely randomly.

Pair Corralation between National Retail and Ebro Foods

Assuming the 90 days trading horizon National Retail Properties is expected to under-perform the Ebro Foods. In addition to that, National Retail is 1.07 times more volatile than Ebro Foods SA. It trades about -0.52 of its total potential returns per unit of risk. Ebro Foods SA is currently generating about 0.01 per unit of volatility. If you would invest  1,572  in Ebro Foods SA on September 23, 2024 and sell it today you would earn a total of  2.00  from holding Ebro Foods SA or generate 0.13% return on investment over 90 days.

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

National Retail Properties  vs.  Ebro Foods SA

National Retail Prop

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days National Retail Properties has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest fragile performance, the Stock's basic indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

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.

Pair Trading with National Retail and Ebro Foods

The main advantage of trading using opposite National Retail and Ebro Foods positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if National Retail 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 National Retail Properties and Ebro Foods SA 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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.