Correlation Between Ebro Foods and BW Offshore
Can any of the company-specific risk be diversified away by investing in both Ebro Foods and BW Offshore 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 Ebro Foods and BW Offshore into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Ebro Foods and BW Offshore, you can compare the effects of market volatilities on Ebro Foods and BW Offshore 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 Ebro Foods with a short position of BW Offshore. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ebro Foods and BW Offshore.
Diversification Opportunities for Ebro Foods and BW Offshore
0.63 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Ebro and 0RKH is 0.63. Overlapping area represents the amount of risk that can be diversified away by holding Ebro Foods and BW Offshore in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BW Offshore and Ebro Foods 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 Ebro Foods are associated (or correlated) with BW Offshore. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BW Offshore has no effect on the direction of Ebro Foods i.e., Ebro Foods and BW Offshore go up and down completely randomly.
Pair Corralation between Ebro Foods and BW Offshore
Assuming the 90 days trading horizon Ebro Foods is expected to generate 8.64 times less return on investment than BW Offshore. But when comparing it to its historical volatility, Ebro Foods is 2.76 times less risky than BW Offshore. It trades about 0.03 of its potential returns per unit of risk. BW Offshore is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest 1,935 in BW Offshore on August 24, 2024 and sell it today you would earn a total of 885.00 from holding BW Offshore or generate 45.74% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 97.21% |
| Values | Daily Returns |
Ebro Foods vs. BW Offshore
Performance |
| Timeline |
| Ebro Foods |
| BW Offshore |
Ebro Foods and BW Offshore Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Ebro Foods and BW Offshore
The main advantage of trading using opposite Ebro Foods and BW Offshore positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ebro Foods position performs unexpectedly, BW Offshore 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 BW Offshore will offset losses from the drop in BW Offshore's long position.| Ebro Foods vs. Quadrise Plc | Ebro Foods vs. Intuitive Investments Group | Ebro Foods vs. European Metals Holdings | Ebro Foods vs. Athelney Trust plc |
| BW Offshore vs. Quadrise Plc | BW Offshore vs. Intuitive Investments Group | BW Offshore vs. European Metals Holdings | BW Offshore vs. Athelney Trust plc |
Check out your portfolio center.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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.
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