Correlation Between ASSA ABLOY and Bufab Holding

Can any of the company-specific risk be diversified away by investing in both ASSA ABLOY 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 ASSA ABLOY and Bufab Holding into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between ASSA ABLOY AB and Bufab Holding AB, you can compare the effects of market volatilities on ASSA ABLOY 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 ASSA ABLOY with a short position of Bufab Holding. Check out your portfolio center. Please also check ongoing floating volatility patterns of ASSA ABLOY and Bufab Holding.

Diversification Opportunities for ASSA ABLOY and Bufab Holding

0.37

Correlation Coefficient

ASSA ABLOY  Bufab Holding

Weak diversification

The 3 months correlation between ASSA and Bufab is 0.37. Overlapping area represents the amount of risk that can be diversified away by holding ASSA ABLOY 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 ASSA ABLOY 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 ASSA ABLOY 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 ASSA ABLOY i.e., ASSA ABLOY and Bufab Holding go up and down completely randomly.

Pair Corralation between ASSA ABLOY and Bufab Holding

Assuming the 90 days trading horizon ASSA ABLOY is expected to generate 4.84 times less return on investment than Bufab Holding. But when comparing it to its historical volatility, ASSA ABLOY AB is 1.44 times less risky than Bufab Holding. It trades about 0.01 of its potential returns per unit of risk. Bufab Holding AB is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  43,900  in Bufab Holding AB on December 2, 2024 and sell it today you would earn a total of  1,340  from holding Bufab Holding AB or generate 3.05% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

ASSA ABLOY AB  vs.  Bufab Holding AB

ASSA ABLOY AB

Risk-Adjusted Performance

Very Weak

Over the last 90 days ASSA ABLOY AB has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, ASSA ABLOY is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Bufab Holding AB

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Bufab Holding AB are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak basic indicators, Bufab Holding may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with ASSA ABLOY and Bufab Holding

The main advantage of trading using opposite ASSA ABLOY and Bufab Holding positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if ASSA ABLOY 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 ASSA ABLOY 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.

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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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.