Correlation Between Bufab Holding and Bilia AB

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

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

Diversification Opportunities for Bufab Holding and Bilia AB

0.72

Correlation Coefficient

Bufab Holding  Bilia AB

Poor diversification

The 3 months correlation between Bufab and Bilia is 0.72. Overlapping area represents the amount of risk that can be diversified away by holding Bufab Holding AB and Bilia AB in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bilia AB and Bufab Holding 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 Bufab Holding AB are associated (or correlated) with Bilia AB. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Bilia AB has no effect on the direction of Bufab Holding i.e., Bufab Holding and Bilia AB go up and down completely randomly.

Pair Corralation between Bufab Holding and Bilia AB

Assuming the 90 days trading horizon Bufab Holding AB is expected to generate 1.34 times more return on investment than Bilia AB. However, Bufab Holding is 1.34 times more volatile than Bilia AB. It trades about 0.05 of its potential returns per unit of risk. Bilia AB is currently generating about 0.02 per unit of risk. If you would invest  41,040  in Bufab Holding AB on September 5, 2024 and sell it today you would earn a total of  2,320  from holding Bufab Holding AB or generate 5.65% return on investment over 90 days.

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

Bufab Holding AB  vs.  Bilia AB

Bufab Holding AB

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Bufab Holding AB are ranked lower than 3 (%) 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 January 2025.

Bilia AB

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Bilia AB are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong essential indicators, Bilia AB is not utilizing all of its potentials. The newest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Bufab Holding and Bilia AB

The main advantage of trading using opposite Bufab Holding and Bilia AB positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Bufab Holding position performs unexpectedly, Bilia AB 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 Bilia AB will offset losses from the drop in Bilia AB's long position.

The idea behind Bufab Holding AB and Bilia 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 Global Correlations module to find global opportunities by holding instruments from different markets.