Correlation Between Global Fashion and Ebro Foods

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

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

Diversification Opportunities for Global Fashion and Ebro Foods

0.7

Correlation Coefficient

Global Fashion  Ebro Foods

Poor diversification

The 3 months correlation between Global and Ebro is 0.7. Overlapping area represents the amount of risk that can be diversified away by holding Global Fashion Group 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 Global Fashion 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 Global Fashion Group 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 Global Fashion i.e., Global Fashion and Ebro Foods go up and down completely randomly.

Pair Corralation between Global Fashion and Ebro Foods

Assuming the 90 days trading horizon Global Fashion Group is expected to generate 5.84 times more return on investment than Ebro Foods. However, Global Fashion is 5.84 times more volatile than Ebro Foods SA. It trades about 0.08 of its potential returns per unit of risk. Ebro Foods SA is currently generating about 0.09 per unit of risk. If you would invest  22.00  in Global Fashion Group on October 23, 2024 and sell it today you would earn a total of  1.00  from holding Global Fashion Group or generate 4.55% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	94.12%
Values	Daily Returns

Global Fashion Group  vs.  Ebro Foods SA

Global Fashion Group

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Global Fashion Group has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable technical and fundamental indicators, Global Fashion is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the 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 Global Fashion and Ebro Foods

The main advantage of trading using opposite Global Fashion and Ebro Foods positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Global Fashion 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 Global Fashion Group 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 Portfolio File Import module to quickly import all of your third-party portfolios from your local drive in csv format.