Correlation Between Associated British and Various Eateries
Can any of the company-specific risk be diversified away by investing in both Associated British and Various Eateries 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 Associated British and Various Eateries into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Associated British Foods and Various Eateries PLC, you can compare the effects of market volatilities on Associated British and Various Eateries 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 Associated British with a short position of Various Eateries. Check out your portfolio center. Please also check ongoing floating volatility patterns of Associated British and Various Eateries.
Diversification Opportunities for Associated British and Various Eateries
0.76 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Associated and Various is 0.76. Overlapping area represents the amount of risk that can be diversified away by holding Associated British Foods and Various Eateries PLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Various Eateries PLC and Associated British 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 Associated British Foods are associated (or correlated) with Various Eateries. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Various Eateries PLC has no effect on the direction of Associated British i.e., Associated British and Various Eateries go up and down completely randomly.
Pair Corralation between Associated British and Various Eateries
Assuming the 90 days trading horizon Associated British Foods is expected to generate 0.85 times more return on investment than Various Eateries. However, Associated British Foods is 1.17 times less risky than Various Eateries. It trades about -0.49 of its potential returns per unit of risk. Various Eateries PLC is currently generating about -0.42 per unit of risk. If you would invest 214,970 in Associated British Foods on October 12, 2024 and sell it today you would lose (18,320) from holding Associated British Foods or give up 8.52% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Associated British Foods vs. Various Eateries PLC
Performance |
| Timeline |
| Associated British Foods |
| Various Eateries PLC |
Associated British and Various Eateries Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Associated British and Various Eateries
The main advantage of trading using opposite Associated British and Various Eateries positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Associated British position performs unexpectedly, Various Eateries 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 Various Eateries will offset losses from the drop in Various Eateries' long position.| Associated British vs. Synchrony Financial | Associated British vs. Sydbank | Associated British vs. International Biotechnology Trust | Associated British vs. FinecoBank SpA |
| Various Eateries vs. Dairy Farm International | Various Eateries vs. Global Net Lease | Various Eateries vs. Edita Food Industries | Various Eateries vs. Associated British Foods |
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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