Correlation Between Ebro Foods and Derwent London
Can any of the company-specific risk be diversified away by investing in both Ebro Foods and Derwent London 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 Derwent London into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Ebro Foods and Derwent London PLC, you can compare the effects of market volatilities on Ebro Foods and Derwent London 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 Derwent London. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ebro Foods and Derwent London.
Diversification Opportunities for Ebro Foods and Derwent London
0.59 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Ebro and Derwent is 0.59. Overlapping area represents the amount of risk that can be diversified away by holding Ebro Foods and Derwent London PLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Derwent London PLC 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 Derwent London. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Derwent London PLC has no effect on the direction of Ebro Foods i.e., Ebro Foods and Derwent London go up and down completely randomly.
Pair Corralation between Ebro Foods and Derwent London
Assuming the 90 days trading horizon Ebro Foods is expected to generate 0.35 times more return on investment than Derwent London. However, Ebro Foods is 2.85 times less risky than Derwent London. It trades about 0.03 of its potential returns per unit of risk. Derwent London PLC is currently generating about -0.13 per unit of risk. If you would invest 1,584 in Ebro Foods on October 24, 2024 and sell it today you would earn a total of 4.00 from holding Ebro Foods or generate 0.25% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Ebro Foods vs. Derwent London PLC
Performance |
| Timeline |
| Ebro Foods |
| Derwent London PLC |
Ebro Foods and Derwent London Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Ebro Foods and Derwent London
The main advantage of trading using opposite Ebro Foods and Derwent London positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ebro Foods position performs unexpectedly, Derwent London 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 Derwent London will offset losses from the drop in Derwent London's long position.| Ebro Foods vs. Roadside Real Estate | Ebro Foods vs. Bell Food Group | Ebro Foods vs. Grieg Seafood | Ebro Foods vs. Virgin Wines UK |
| Derwent London vs. Porvair plc | Derwent London vs. Norwegian Air Shuttle | Derwent London vs. New Residential Investment | Derwent London vs. Zegona Communications 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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .
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