Correlation Between Virgin Wines and Ebro Foods
Can any of the company-specific risk be diversified away by investing in both Virgin Wines 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 Virgin Wines and Ebro Foods into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Virgin Wines UK and Ebro Foods, you can compare the effects of market volatilities on Virgin Wines 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 Virgin Wines with a short position of Ebro Foods. Check out your portfolio center. Please also check ongoing floating volatility patterns of Virgin Wines and Ebro Foods.
Diversification Opportunities for Virgin Wines and Ebro Foods
0.31 | Correlation Coefficient |
Weak diversification
The 3 months correlation between Virgin and Ebro is 0.31. Overlapping area represents the amount of risk that can be diversified away by holding Virgin Wines UK and Ebro Foods in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ebro Foods and Virgin Wines 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 Virgin Wines UK 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 Virgin Wines i.e., Virgin Wines and Ebro Foods go up and down completely randomly.
Pair Corralation between Virgin Wines and Ebro Foods
Assuming the 90 days trading horizon Virgin Wines UK is expected to under-perform the Ebro Foods. In addition to that, Virgin Wines is 3.97 times more volatile than Ebro Foods. It trades about -0.17 of its total potential returns per unit of risk. Ebro Foods is currently generating about 0.08 per unit of volatility. If you would invest 1,599 in Ebro Foods on November 3, 2024 and sell it today you would earn a total of 14.00 from holding Ebro Foods or generate 0.88% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Virgin Wines UK vs. Ebro Foods
Performance |
| Timeline |
| Virgin Wines UK |
| Ebro Foods |
Virgin Wines and Ebro Foods Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Virgin Wines and Ebro Foods
The main advantage of trading using opposite Virgin Wines and Ebro Foods positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Virgin Wines 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.| Virgin Wines vs. Auction Technology Group | Virgin Wines vs. Polar Capital Technology | Virgin Wines vs. Vitec Software Group | Virgin Wines vs. Telecom Italia SpA |
| Ebro Foods vs. Summit Materials Cl | Ebro Foods vs. Martin Marietta Materials | Ebro Foods vs. MyHealthChecked Plc | Ebro Foods vs. Applied Materials |
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 Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.
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