Correlation Between Indutrade and Bufab Holding
Can any of the company-specific risk be diversified away by investing in both Indutrade 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 Indutrade and Bufab Holding into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Indutrade AB and Bufab Holding AB, you can compare the effects of market volatilities on Indutrade 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 Indutrade with a short position of Bufab Holding. Check out your portfolio center. Please also check ongoing floating volatility patterns of Indutrade and Bufab Holding.
Diversification Opportunities for Indutrade and Bufab Holding
0.84 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Indutrade and Bufab is 0.84. Overlapping area represents the amount of risk that can be diversified away by holding Indutrade 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 Indutrade 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 Indutrade 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 Indutrade i.e., Indutrade and Bufab Holding go up and down completely randomly.
Pair Corralation between Indutrade and Bufab Holding
Assuming the 90 days trading horizon Indutrade AB is expected to under-perform the Bufab Holding. But the stock apears to be less risky and, when comparing its historical volatility, Indutrade AB is 1.25 times less risky than Bufab Holding. The stock trades about -0.26 of its potential returns per unit of risk. The Bufab Holding AB is currently generating about -0.15 of returns per unit of risk over similar time horizon. If you would invest 46,140 in Bufab Holding AB on December 26, 2024 and sell it today you would lose (3,060) from holding Bufab Holding AB or give up 6.63% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Indutrade AB vs. Bufab Holding AB
Performance |
| Timeline |
| Indutrade AB |
| Bufab Holding AB |
Indutrade and Bufab Holding Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Indutrade and Bufab Holding
The main advantage of trading using opposite Indutrade and Bufab Holding positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Indutrade 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.| Indutrade vs. Lifco AB | Indutrade vs. Addtech AB | Indutrade vs. NIBE Industrier AB | Indutrade vs. Investment AB Latour |
| 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 Portfolio Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.
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