Correlation Between Bufab Holding and Troax Group
Can any of the company-specific risk be diversified away by investing in both Bufab Holding and Troax 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 Bufab Holding and Troax Group 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 Troax Group AB, you can compare the effects of market volatilities on Bufab Holding and Troax 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 Bufab Holding with a short position of Troax Group. Check out your portfolio center. Please also check ongoing floating volatility patterns of Bufab Holding and Troax Group.
Diversification Opportunities for Bufab Holding and Troax Group
0.35 | Correlation Coefficient |
Weak diversification
The 3 months correlation between Bufab and Troax is 0.35. Overlapping area represents the amount of risk that can be diversified away by holding Bufab Holding AB and Troax Group AB in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Troax Group 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 Troax Group. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Troax Group AB has no effect on the direction of Bufab Holding i.e., Bufab Holding and Troax Group go up and down completely randomly.
Pair Corralation between Bufab Holding and Troax Group
Assuming the 90 days trading horizon Bufab Holding AB is expected to generate 0.76 times more return on investment than Troax Group. However, Bufab Holding AB is 1.32 times less risky than Troax Group. It trades about 0.18 of its potential returns per unit of risk. Troax Group AB is currently generating about 0.1 per unit of risk. If you would invest 39,000 in Bufab Holding AB on August 25, 2024 and sell it today you would earn a total of 2,420 from holding Bufab Holding AB or generate 6.21% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 95.65% |
| Values | Daily Returns |
Bufab Holding AB vs. Troax Group AB
Performance |
| Timeline |
| Bufab Holding AB |
| Troax Group AB |
Bufab Holding and Troax Group Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Bufab Holding and Troax Group
The main advantage of trading using opposite Bufab Holding and Troax Group positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Bufab Holding position performs unexpectedly, Troax 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 Troax Group will offset losses from the drop in Troax Group'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 |
| Troax Group vs. Bufab Holding AB | Troax Group vs. Thule Group AB | Troax Group vs. Beijer Ref AB | Troax Group vs. Lifco 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 Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.
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