Correlation Between Dairy Farm and Ebro Foods

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

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

Diversification Opportunities for Dairy Farm and Ebro Foods

0.0

Correlation Coefficient

Dairy Farm  Ebro Foods

Pay attention - limited upside

The 3 months correlation between Dairy and Ebro is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding Dairy Farm International and Ebro Foods in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ebro Foods and Dairy Farm 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 Dairy Farm International 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 Dairy Farm i.e., Dairy Farm and Ebro Foods go up and down completely randomly.

Pair Corralation between Dairy Farm and Ebro Foods

If you would invest  1,485  in Ebro Foods on October 9, 2024 and sell it today you would earn a total of  117.00  from holding Ebro Foods or generate 7.88% return on investment over 90 days.

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

Dairy Farm International  vs.  Ebro Foods

Dairy Farm International

Risk-Adjusted Performance

0 of 100

Very Weak

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

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.

Pair Trading with Dairy Farm and Ebro Foods

The main advantage of trading using opposite Dairy Farm and Ebro Foods positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dairy Farm 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 Dairy Farm International 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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.