Correlation Between Ebro Foods and S A P
Can any of the company-specific risk be diversified away by investing in both Ebro Foods and S A P 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 S A P into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Ebro Foods SA and SAP SE, you can compare the effects of market volatilities on Ebro Foods and S A P 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 S A P. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ebro Foods and S A P.
Diversification Opportunities for Ebro Foods and S A P
0.55 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Ebro and SAP is 0.55. Overlapping area represents the amount of risk that can be diversified away by holding Ebro Foods SA and SAP SE in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SAP SE 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 SA are associated (or correlated) with S A P. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SAP SE has no effect on the direction of Ebro Foods i.e., Ebro Foods and S A P go up and down completely randomly.
Pair Corralation between Ebro Foods and S A P
Assuming the 90 days horizon Ebro Foods SA is expected to under-perform the S A P. But the stock apears to be less risky and, when comparing its historical volatility, Ebro Foods SA is 1.23 times less risky than S A P. The stock trades about -0.14 of its potential returns per unit of risk. The SAP SE is currently generating about 0.28 of returns per unit of risk over similar time horizon. If you would invest 21,380 in SAP SE on September 4, 2024 and sell it today you would earn a total of 1,725 from holding SAP SE or generate 8.07% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Ebro Foods SA vs. SAP SE
Performance |
| Timeline |
| Ebro Foods SA |
| SAP SE |
Ebro Foods and S A P Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Ebro Foods and S A P
The main advantage of trading using opposite Ebro Foods and S A P positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ebro Foods position performs unexpectedly, S A P 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 S A P will offset losses from the drop in S A P's long position.| Ebro Foods vs. Nestl SA | Ebro Foods vs. Kraft Heinz Co | Ebro Foods vs. General Mills | Ebro Foods vs. Kellogg Company |
| S A P vs. Laureate Education | S A P vs. Strategic Education | S A P vs. InPlay Oil Corp | S A P vs. DEVRY EDUCATION GRP |
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 Portfolio Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.
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