Correlation Between Gamma Communications and Ebro Foods
Can any of the company-specific risk be diversified away by investing in both Gamma Communications and Ebro 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 Gamma Communications and Ebro Foods into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Gamma Communications PLC and Ebro Foods, you can compare the effects of market volatilities on Gamma Communications and Ebro 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 Gamma Communications with a short position of Ebro Foods. Check out your portfolio center. Please also check ongoing floating volatility patterns of Gamma Communications and Ebro Foods.
Diversification Opportunities for Gamma Communications and Ebro Foods
-0.54 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Gamma and Ebro is -0.54. Overlapping area represents the amount of risk that can be diversified away by holding Gamma Communications PLC and Ebro Foods in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ebro Foods and Gamma Communications 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 Gamma Communications PLC are associated (or correlated) with Ebro Foods. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ebro Foods has no effect on the direction of Gamma Communications i.e., Gamma Communications and Ebro Foods go up and down completely randomly.
Pair Corralation between Gamma Communications and Ebro Foods
Assuming the 90 days trading horizon Gamma Communications PLC is expected to generate 1.92 times more return on investment than Ebro Foods. However, Gamma Communications is 1.92 times more volatile than Ebro Foods. It trades about 0.04 of its potential returns per unit of risk. Ebro Foods is currently generating about 0.02 per unit of risk. If you would invest 103,542 in Gamma Communications PLC on December 27, 2024 and sell it today you would earn a total of 24,058 from holding Gamma Communications PLC or generate 23.24% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Gamma Communications PLC vs. Ebro Foods
Performance |
| Timeline |
| Gamma Communications PLC |
| Ebro Foods |
Gamma Communications and Ebro Foods Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Gamma Communications and Ebro Foods
The main advantage of trading using opposite Gamma Communications and Ebro Foods positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Gamma Communications position performs unexpectedly, Ebro 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 Ebro Foods will offset losses from the drop in Ebro Foods' long position.| Gamma Communications vs. Cembra Money Bank | Gamma Communications vs. InterContinental Hotels Group | Gamma Communications vs. Erste Group Bank | Gamma Communications vs. UNIQA Insurance Group |
| Ebro Foods vs. United Utilities Group | Ebro Foods vs. Universal Display Corp | Ebro Foods vs. New Residential Investment | Ebro Foods vs. Kinnevik Investment 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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.
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