Correlation Between Duni AB and Bufab Holding
Can any of the company-specific risk be diversified away by investing in both Duni AB 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 Duni AB and Bufab Holding into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Duni AB and Bufab Holding AB, you can compare the effects of market volatilities on Duni AB 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 Duni AB with a short position of Bufab Holding. Check out your portfolio center. Please also check ongoing floating volatility patterns of Duni AB and Bufab Holding.
Diversification Opportunities for Duni AB and Bufab Holding
-0.68 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Duni and Bufab is -0.68. Overlapping area represents the amount of risk that can be diversified away by holding Duni AB 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 Duni AB 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 Duni AB 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 Duni AB i.e., Duni AB and Bufab Holding go up and down completely randomly.
Pair Corralation between Duni AB and Bufab Holding
Assuming the 90 days trading horizon Duni AB is expected to generate 30.05 times less return on investment than Bufab Holding. But when comparing it to its historical volatility, Duni AB is 1.46 times less risky than Bufab Holding. It trades about 0.0 of its potential returns per unit of risk. Bufab Holding AB is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest 35,407 in Bufab Holding AB on August 31, 2024 and sell it today you would earn a total of 5,393 from holding Bufab Holding AB or generate 15.23% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Duni AB vs. Bufab Holding AB
Performance |
| Timeline |
| Duni AB |
| Bufab Holding AB |
Duni AB and Bufab Holding Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Duni AB and Bufab Holding
The main advantage of trading using opposite Duni AB and Bufab Holding positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Duni AB 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.The idea behind Duni AB and Bufab Holding AB 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.| 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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.
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