Correlation Between First Tractor and Buhler Industries
Can any of the company-specific risk be diversified away by investing in both First Tractor and Buhler Industries 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 First Tractor and Buhler Industries into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between First Tractor and Buhler Industries, you can compare the effects of market volatilities on First Tractor and Buhler Industries 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 First Tractor with a short position of Buhler Industries. Check out your portfolio center. Please also check ongoing floating volatility patterns of First Tractor and Buhler Industries.
Diversification Opportunities for First Tractor and Buhler Industries
-1.0 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between First and Buhler is -1.0. Overlapping area represents the amount of risk that can be diversified away by holding First Tractor and Buhler Industries in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Buhler Industries and First Tractor 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 First Tractor are associated (or correlated) with Buhler Industries. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Buhler Industries has no effect on the direction of First Tractor i.e., First Tractor and Buhler Industries go up and down completely randomly.
Pair Corralation between First Tractor and Buhler Industries
Assuming the 90 days horizon First Tractor is expected to generate 2.81 times more return on investment than Buhler Industries. However, First Tractor is 2.81 times more volatile than Buhler Industries. It trades about 0.04 of its potential returns per unit of risk. Buhler Industries is currently generating about 0.04 per unit of risk. If you would invest 44.00 in First Tractor on August 26, 2024 and sell it today you would earn a total of 19.00 from holding First Tractor or generate 43.18% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Strong |
| Accuracy | 82.7% |
| Values | Daily Returns |
First Tractor vs. Buhler Industries
Performance |
| Timeline |
| First Tractor |
| Buhler Industries |
First Tractor and Buhler Industries Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with First Tractor and Buhler Industries
The main advantage of trading using opposite First Tractor and Buhler Industries positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if First Tractor position performs unexpectedly, Buhler Industries 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 Buhler Industries will offset losses from the drop in Buhler Industries' long position.| First Tractor vs. Copa Holdings SA | First Tractor vs. United Airlines Holdings | First Tractor vs. Delta Air Lines | First Tractor vs. SkyWest |
| Buhler Industries vs. Element Solutions | Buhler Industries vs. Orion Engineered Carbons | Buhler Industries vs. Minerals Technologies | Buhler Industries vs. Ingevity Corp |
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 Global Correlations module to find global opportunities by holding instruments from different markets.
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