Correlation Between Garo AB and Bufab Holding
Can any of the company-specific risk be diversified away by investing in both Garo 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 Garo 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 Garo AB and Bufab Holding AB, you can compare the effects of market volatilities on Garo 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 Garo AB with a short position of Bufab Holding. Check out your portfolio center. Please also check ongoing floating volatility patterns of Garo AB and Bufab Holding.
Diversification Opportunities for Garo AB and Bufab Holding
0.1 | Correlation Coefficient |
Average diversification
The 3 months correlation between Garo and Bufab is 0.1. Overlapping area represents the amount of risk that can be diversified away by holding Garo 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 Garo 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 Garo 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 Garo AB i.e., Garo AB and Bufab Holding go up and down completely randomly.
Pair Corralation between Garo AB and Bufab Holding
Assuming the 90 days trading horizon Garo AB is expected to under-perform the Bufab Holding. In addition to that, Garo AB is 1.28 times more volatile than Bufab Holding AB. It trades about -0.11 of its total potential returns per unit of risk. Bufab Holding AB is currently generating about 0.07 per unit of volatility. If you would invest 21,695 in Bufab Holding AB on August 28, 2024 and sell it today you would earn a total of 20,165 from holding Bufab Holding AB or generate 92.95% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Garo AB vs. Bufab Holding AB
Performance |
| Timeline |
| Garo AB |
| Bufab Holding AB |
Garo AB and Bufab Holding Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Garo AB and Bufab Holding
The main advantage of trading using opposite Garo AB and Bufab Holding positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Garo 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.| Garo AB vs. Addtech AB | Garo AB vs. Teqnion AB | Garo AB vs. Vitec Software Group | Garo AB vs. Lagercrantz Group AB |
| Bufab Holding vs. Addtech AB | Bufab Holding vs. Teqnion AB | Bufab Holding vs. Vitec Software Group | Bufab Holding vs. Lagercrantz Group 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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.
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