Correlation Between Ebro Foods and Premier Foods
Can any of the company-specific risk be diversified away by investing in both Ebro Foods and Premier 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 Ebro Foods and Premier Foods into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Ebro Foods and Premier Foods PLC, you can compare the effects of market volatilities on Ebro Foods and Premier 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 Ebro Foods with a short position of Premier Foods. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ebro Foods and Premier Foods.
Diversification Opportunities for Ebro Foods and Premier Foods
0.75 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Ebro and Premier is 0.75. Overlapping area represents the amount of risk that can be diversified away by holding Ebro Foods and Premier Foods PLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Premier Foods 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 Premier Foods. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Premier Foods PLC has no effect on the direction of Ebro Foods i.e., Ebro Foods and Premier Foods go up and down completely randomly.
Pair Corralation between Ebro Foods and Premier Foods
Assuming the 90 days trading horizon Ebro Foods is expected to generate 0.59 times more return on investment than Premier Foods. However, Ebro Foods is 1.7 times less risky than Premier Foods. It trades about -0.08 of its potential returns per unit of risk. Premier Foods PLC is currently generating about -0.05 per unit of risk. If you would invest 1,616 in Ebro Foods on August 27, 2024 and sell it today you would lose (21.00) from holding Ebro Foods or give up 1.3% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Ebro Foods vs. Premier Foods PLC
Performance |
| Timeline |
| Ebro Foods |
| Premier Foods PLC |
Ebro Foods and Premier Foods Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Ebro Foods and Premier Foods
The main advantage of trading using opposite Ebro Foods and Premier Foods positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ebro Foods position performs unexpectedly, Premier 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 Premier Foods will offset losses from the drop in Premier Foods' long position.| Ebro Foods vs. Roadside Real Estate | Ebro Foods vs. International Biotechnology Trust | Ebro Foods vs. Broadridge Financial Solutions | Ebro Foods vs. Norman Broadbent Plc |
| Premier Foods vs. Edita Food Industries | Premier Foods vs. Grieg Seafood | Premier Foods vs. Cairo Communication SpA | Premier Foods vs. Axfood AB |
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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.
Other Complementary Tools
| Balance Of Power Check stock momentum by analyzing Balance Of Power indicator and other technical ratios | |
| Crypto Correlations Use cryptocurrency correlation module to diversify your cryptocurrency portfolio across multiple coins | |
| Performance Analysis Check effects of mean-variance optimization against your current asset allocation | |
| Price Exposure Probability Analyze equity upside and downside potential for a given time horizon across multiple markets | |
| Earnings Calls Check upcoming earnings announcements updated hourly across public exchanges |