Correlation Between Cia De and Ebro Foods

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

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

Diversification Opportunities for Cia De and Ebro Foods

0.03

Correlation Coefficient

Cia De  Ebro Foods

Significant diversification

The 3 months correlation between Cia and Ebro is 0.03. Overlapping area represents the amount of risk that can be diversified away by holding Cia de Distribucion and Ebro Foods in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ebro Foods and Cia De 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 Cia de Distribucion 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 Cia De i.e., Cia De and Ebro Foods go up and down completely randomly.

Pair Corralation between Cia De and Ebro Foods

Assuming the 90 days trading horizon Cia de Distribucion is expected to generate 0.94 times more return on investment than Ebro Foods. However, Cia de Distribucion is 1.06 times less risky than Ebro Foods. It trades about 0.01 of its potential returns per unit of risk. Ebro Foods is currently generating about -0.06 per unit of risk. If you would invest  2,940  in Cia de Distribucion on September 13, 2024 and sell it today you would earn a total of  4.00  from holding Cia de Distribucion or generate 0.14% return on investment over 90 days.

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

Cia de Distribucion  vs.  Ebro Foods

Cia de Distribucion

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Cia de Distribucion are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound technical and fundamental indicators, Cia De is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

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 rather sound fundamental indicators, Ebro Foods is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Cia De and Ebro Foods

The main advantage of trading using opposite Cia De and Ebro Foods positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Cia De 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 Cia de Distribucion 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 Money Managers module to screen money managers from public funds and ETFs managed around the world.