Correlation Between Buhler Industries and Southern Energy
Can any of the company-specific risk be diversified away by investing in both Buhler Industries and Southern Energy 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 Buhler Industries and Southern Energy into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Buhler Industries and Southern Energy Corp, you can compare the effects of market volatilities on Buhler Industries and Southern Energy 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 Buhler Industries with a short position of Southern Energy. Check out your portfolio center. Please also check ongoing floating volatility patterns of Buhler Industries and Southern Energy.
Diversification Opportunities for Buhler Industries and Southern Energy
-0.63 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Buhler and Southern is -0.63. Overlapping area represents the amount of risk that can be diversified away by holding Buhler Industries and Southern Energy Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Southern Energy Corp and Buhler Industries 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 Buhler Industries are associated (or correlated) with Southern Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Southern Energy Corp has no effect on the direction of Buhler Industries i.e., Buhler Industries and Southern Energy go up and down completely randomly.
Pair Corralation between Buhler Industries and Southern Energy
Assuming the 90 days trading horizon Buhler Industries is expected to generate 0.51 times more return on investment than Southern Energy. However, Buhler Industries is 1.95 times less risky than Southern Energy. It trades about 0.1 of its potential returns per unit of risk. Southern Energy Corp is currently generating about -0.12 per unit of risk. If you would invest 219.00 in Buhler Industries on September 1, 2024 and sell it today you would earn a total of 76.00 from holding Buhler Industries or generate 34.7% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 99.21% |
| Values | Daily Returns |
Buhler Industries vs. Southern Energy Corp
Performance |
| Timeline |
| Buhler Industries |
| Southern Energy Corp |
Buhler Industries and Southern Energy Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Buhler Industries and Southern Energy
The main advantage of trading using opposite Buhler Industries and Southern Energy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Buhler Industries position performs unexpectedly, Southern Energy 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 Southern Energy will offset losses from the drop in Southern Energy's long position.| Buhler Industries vs. Clarke Inc | Buhler Industries vs. Accord Financial Corp | Buhler Industries vs. ADF Group | Buhler Industries vs. Algoma Central |
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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.
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