Correlation Between SCOTT TECHNOLOGY and Ebro Foods

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

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

Diversification Opportunities for SCOTT TECHNOLOGY and Ebro Foods

-0.16

Correlation Coefficient

SCOTT TECHNOLOGY  Ebro Foods

Good diversification

The 3 months correlation between SCOTT and Ebro is -0.16. Overlapping area represents the amount of risk that can be diversified away by holding SCOTT TECHNOLOGY 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 SCOTT TECHNOLOGY 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 SCOTT TECHNOLOGY 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 SCOTT TECHNOLOGY i.e., SCOTT TECHNOLOGY and Ebro Foods go up and down completely randomly.

Pair Corralation between SCOTT TECHNOLOGY and Ebro Foods

Assuming the 90 days trading horizon SCOTT TECHNOLOGY is expected to generate 23.75 times less return on investment than Ebro Foods. In addition to that, SCOTT TECHNOLOGY is 3.22 times more volatile than Ebro Foods SA. It trades about 0.0 of its total potential returns per unit of risk. Ebro Foods SA is currently generating about 0.02 per unit of volatility. If you would invest  1,481  in Ebro Foods SA on October 11, 2024 and sell it today you would earn a total of  111.00  from holding Ebro Foods SA or generate 7.49% return on investment over 90 days.

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

SCOTT TECHNOLOGY  vs.  Ebro Foods SA

SCOTT TECHNOLOGY

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in SCOTT TECHNOLOGY are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of rather fragile technical indicators, SCOTT TECHNOLOGY may actually be approaching a critical reversion point that can send shares even higher in February 2025.

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 SCOTT TECHNOLOGY and Ebro Foods

The main advantage of trading using opposite SCOTT TECHNOLOGY and Ebro Foods positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if SCOTT TECHNOLOGY 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 SCOTT TECHNOLOGY 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.