Correlation Between Cavotec SA and Bufab Holding
Can any of the company-specific risk be diversified away by investing in both Cavotec SA and Bufab Holding 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 Cavotec SA and Bufab Holding into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Cavotec SA and Bufab Holding AB, you can compare the effects of market volatilities on Cavotec SA and Bufab Holding 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 Cavotec SA with a short position of Bufab Holding. Check out your portfolio center. Please also check ongoing floating volatility patterns of Cavotec SA and Bufab Holding.
Diversification Opportunities for Cavotec SA and Bufab Holding
-0.21 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Cavotec and Bufab is -0.21. Overlapping area represents the amount of risk that can be diversified away by holding Cavotec SA and Bufab Holding AB in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bufab Holding AB and Cavotec SA 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 Cavotec SA are associated (or correlated) with Bufab Holding. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Bufab Holding AB has no effect on the direction of Cavotec SA i.e., Cavotec SA and Bufab Holding go up and down completely randomly.
Pair Corralation between Cavotec SA and Bufab Holding
Assuming the 90 days trading horizon Cavotec SA is expected to generate 2.73 times less return on investment than Bufab Holding. In addition to that, Cavotec SA is 1.35 times more volatile than Bufab Holding AB. It trades about 0.06 of its total potential returns per unit of risk. Bufab Holding AB is currently generating about 0.2 per unit of volatility. If you would invest 38,180 in Bufab Holding AB on September 1, 2024 and sell it today you would earn a total of 2,620 from holding Bufab Holding AB or generate 6.86% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 95.65% |
| Values | Daily Returns |
Cavotec SA vs. Bufab Holding AB
Performance |
| Timeline |
| Cavotec SA |
| Bufab Holding AB |
Cavotec SA and Bufab Holding Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Cavotec SA and Bufab Holding
The main advantage of trading using opposite Cavotec SA and Bufab Holding positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Cavotec SA position performs unexpectedly, Bufab Holding 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 Bufab Holding will offset losses from the drop in Bufab Holding's long position.| Cavotec SA vs. Bufab Holding AB | Cavotec SA vs. Nederman Holding AB | Cavotec SA vs. COOR Service Management | Cavotec SA vs. Alimak Hek Group |
| Bufab Holding vs. Addtech AB | Bufab Holding vs. Indutrade AB | Bufab Holding vs. Troax Group AB | Bufab Holding vs. Beijer Ref 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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.
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