Correlation Between Ebro Foods and Spirent Communications
Can any of the company-specific risk be diversified away by investing in both Ebro Foods and Spirent Communications 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 Spirent Communications into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Ebro Foods and Spirent Communications plc, you can compare the effects of market volatilities on Ebro Foods and Spirent Communications 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 Spirent Communications. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ebro Foods and Spirent Communications.
Diversification Opportunities for Ebro Foods and Spirent Communications
-0.35 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Ebro and Spirent is -0.35. Overlapping area represents the amount of risk that can be diversified away by holding Ebro Foods and Spirent Communications plc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Spirent Communications 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 Spirent Communications. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Spirent Communications has no effect on the direction of Ebro Foods i.e., Ebro Foods and Spirent Communications go up and down completely randomly.
Pair Corralation between Ebro Foods and Spirent Communications
Assuming the 90 days trading horizon Ebro Foods is expected to generate 1.24 times less return on investment than Spirent Communications. But when comparing it to its historical volatility, Ebro Foods is 4.67 times less risky than Spirent Communications. It trades about 0.02 of its potential returns per unit of risk. Spirent Communications plc is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest 21,546 in Spirent Communications plc on November 2, 2024 and sell it today you would lose (3,396) from holding Spirent Communications plc or give up 15.76% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Ebro Foods vs. Spirent Communications plc
Performance |
| Timeline |
| Ebro Foods |
| Spirent Communications |
Ebro Foods and Spirent Communications Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Ebro Foods and Spirent Communications
The main advantage of trading using opposite Ebro Foods and Spirent Communications positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ebro Foods position performs unexpectedly, Spirent Communications 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 Spirent Communications will offset losses from the drop in Spirent Communications' long position.| Ebro Foods vs. Dairy Farm International | Ebro Foods vs. Moneta Money Bank | Ebro Foods vs. Erste Group Bank | Ebro Foods vs. Roebuck Food Group |
| Spirent Communications vs. Fonix Mobile plc | Spirent Communications vs. mobilezone holding AG | Spirent Communications vs. Auto Trader Group | Spirent Communications vs. JPMorgan Japanese Investment |
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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.
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