Correlation Between EBRO FOODS and RTL Group
Can any of the company-specific risk be diversified away by investing in both EBRO FOODS and RTL Group 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 RTL Group into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between EBRO FOODS and RTL Group SA, you can compare the effects of market volatilities on EBRO FOODS and RTL Group 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 RTL Group. Check out your portfolio center. Please also check ongoing floating volatility patterns of EBRO FOODS and RTL Group.
Diversification Opportunities for EBRO FOODS and RTL Group
0.57 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between EBRO and RTL is 0.57. Overlapping area represents the amount of risk that can be diversified away by holding EBRO FOODS and RTL Group SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on RTL Group SA 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 RTL Group. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of RTL Group SA has no effect on the direction of EBRO FOODS i.e., EBRO FOODS and RTL Group go up and down completely randomly.
Pair Corralation between EBRO FOODS and RTL Group
Assuming the 90 days trading horizon EBRO FOODS is expected to generate 31.61 times less return on investment than RTL Group. But when comparing it to its historical volatility, EBRO FOODS is 1.03 times less risky than RTL Group. It trades about 0.01 of its potential returns per unit of risk. RTL Group SA is currently generating about 0.37 of returns per unit of risk over similar time horizon. If you would invest 2,630 in RTL Group SA on October 23, 2024 and sell it today you would earn a total of 190.00 from holding RTL Group SA or generate 7.22% 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. RTL Group SA
Performance |
| Timeline |
| EBRO FOODS |
| RTL Group SA |
EBRO FOODS and RTL Group Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with EBRO FOODS and RTL Group
The main advantage of trading using opposite EBRO FOODS and RTL Group positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if EBRO FOODS position performs unexpectedly, RTL Group 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 RTL Group will offset losses from the drop in RTL Group's long position.The idea behind EBRO FOODS and RTL Group SA pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.| RTL Group vs. MOLSON RS BEVERAGE | RTL Group vs. Thai Beverage Public | RTL Group vs. EBRO FOODS | RTL Group vs. Nexstar Media Group |
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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.
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