Correlation Between Bufab Holding and AddLife AB
Can any of the company-specific risk be diversified away by investing in both Bufab Holding and AddLife AB 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 Bufab Holding and AddLife AB into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Bufab Holding AB and AddLife AB, you can compare the effects of market volatilities on Bufab Holding and AddLife AB 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 Bufab Holding with a short position of AddLife AB. Check out your portfolio center. Please also check ongoing floating volatility patterns of Bufab Holding and AddLife AB.
Diversification Opportunities for Bufab Holding and AddLife AB
-0.39 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Bufab and AddLife is -0.39. Overlapping area represents the amount of risk that can be diversified away by holding Bufab Holding AB and AddLife AB in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AddLife AB and Bufab Holding 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 Bufab Holding AB are associated (or correlated) with AddLife AB. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of AddLife AB has no effect on the direction of Bufab Holding i.e., Bufab Holding and AddLife AB go up and down completely randomly.
Pair Corralation between Bufab Holding and AddLife AB
Assuming the 90 days trading horizon Bufab Holding AB is expected to generate 1.02 times more return on investment than AddLife AB. However, Bufab Holding is 1.02 times more volatile than AddLife AB. It trades about -0.03 of its potential returns per unit of risk. AddLife AB is currently generating about -0.14 per unit of risk. If you would invest 43,420 in Bufab Holding AB on August 31, 2024 and sell it today you would lose (2,400) from holding Bufab Holding AB or give up 5.53% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 98.46% |
| Values | Daily Returns |
Bufab Holding AB vs. AddLife AB
Performance |
| Timeline |
| Bufab Holding AB |
| AddLife AB |
Bufab Holding and AddLife AB Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Bufab Holding and AddLife AB
The main advantage of trading using opposite Bufab Holding and AddLife AB positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Bufab Holding position performs unexpectedly, AddLife AB 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 AddLife AB will offset losses from the drop in AddLife AB's long position.| Bufab Holding vs. Addtech AB | Bufab Holding vs. Indutrade AB | Bufab Holding vs. Troax Group AB | Bufab Holding vs. Beijer Ref AB |
| AddLife AB vs. Addtech AB | AddLife AB vs. Lifco AB | AddLife AB vs. Indutrade AB | AddLife AB vs. Lagercrantz Group 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 Portfolio Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.
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