Correlation Between Pescanova and Ercros

Can any of the company-specific risk be diversified away by investing in both Pescanova and Ercros 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 Pescanova and Ercros into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Pescanova SA and Ercros, you can compare the effects of market volatilities on Pescanova and Ercros 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 Pescanova with a short position of Ercros. Check out your portfolio center. Please also check ongoing floating volatility patterns of Pescanova and Ercros.

Diversification Opportunities for Pescanova and Ercros

0.63

Correlation Coefficient

Pescanova  Ercros

Poor diversification

The 3 months correlation between Pescanova and Ercros is 0.63. Overlapping area represents the amount of risk that can be diversified away by holding Pescanova SA and Ercros in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ercros and Pescanova 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 Pescanova SA are associated (or correlated) with Ercros. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ercros has no effect on the direction of Pescanova i.e., Pescanova and Ercros go up and down completely randomly.

Pair Corralation between Pescanova and Ercros

Assuming the 90 days trading horizon Pescanova SA is expected to generate 2.08 times more return on investment than Ercros. However, Pescanova is 2.08 times more volatile than Ercros. It trades about 0.02 of its potential returns per unit of risk. Ercros is currently generating about 0.01 per unit of risk. If you would invest  40.00  in Pescanova SA on January 29, 2024 and sell it today you would earn a total of  1.00  from holding Pescanova SA or generate 2.5% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	100.0%
Values	Daily Returns

Pescanova SA  vs.  Ercros

Pescanova SA

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Pescanova SA are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady basic indicators, Pescanova exhibited solid returns over the last few months and may actually be approaching a breakup point.

Ercros

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Ercros are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady basic indicators, Ercros exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Pescanova and Ercros

The main advantage of trading using opposite Pescanova and Ercros positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Pescanova position performs unexpectedly, Ercros 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 Ercros will offset losses from the drop in Ercros' long position.

The idea behind Pescanova SA and Ercros 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.

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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 ETF Categories module to list of ETF categories grouped based on various criteria, such as the investment strategy or type of investments.