Correlation Between Bufab Holding and Byggmax Group

Can any of the company-specific risk be diversified away by investing in both Bufab Holding and Byggmax Group 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 Byggmax Group 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 Byggmax Group AB, you can compare the effects of market volatilities on Bufab Holding and Byggmax Group 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 Byggmax Group. Check out your portfolio center. Please also check ongoing floating volatility patterns of Bufab Holding and Byggmax Group.

Diversification Opportunities for Bufab Holding and Byggmax Group

0.82

Correlation Coefficient

Bufab Holding  Byggmax Group

Very poor diversification

The 3 months correlation between Bufab and Byggmax is 0.82. Overlapping area represents the amount of risk that can be diversified away by holding Bufab Holding AB and Byggmax Group AB in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Byggmax Group 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 Byggmax Group. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Byggmax Group AB has no effect on the direction of Bufab Holding i.e., Bufab Holding and Byggmax Group go up and down completely randomly.

Pair Corralation between Bufab Holding and Byggmax Group

Assuming the 90 days trading horizon Bufab Holding AB is expected to generate 0.66 times more return on investment than Byggmax Group. However, Bufab Holding AB is 1.52 times less risky than Byggmax Group. It trades about -0.16 of its potential returns per unit of risk. Byggmax Group AB is currently generating about -0.14 per unit of risk. If you would invest  44,660  in Bufab Holding AB on October 5, 2024 and sell it today you would lose (1,300) from holding Bufab Holding AB or give up 2.91% of portfolio value over 90 days.

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

Bufab Holding AB  vs.  Byggmax Group AB

Bufab Holding AB

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Bufab Holding AB are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak basic indicators, Bufab Holding unveiled solid returns over the last few months and may actually be approaching a breakup point.

Byggmax Group AB

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Byggmax Group AB are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak basic indicators, Byggmax Group unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Bufab Holding and Byggmax Group

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

The idea behind Bufab Holding AB and Byggmax Group 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 Portfolio Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.