Correlation Between Bufab Holding and Clas Ohlson

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

Diversification Opportunities for Bufab Holding and Clas Ohlson

0.65

Correlation Coefficient

Bufab Holding  Clas Ohlson

Poor diversification

The 3 months correlation between Bufab and Clas is 0.65. Overlapping area represents the amount of risk that can be diversified away by holding Bufab Holding AB and Clas Ohlson AB in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Clas Ohlson 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 Clas Ohlson. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Clas Ohlson AB has no effect on the direction of Bufab Holding i.e., Bufab Holding and Clas Ohlson go up and down completely randomly.

Pair Corralation between Bufab Holding and Clas Ohlson

Assuming the 90 days trading horizon Bufab Holding AB is expected to under-perform the Clas Ohlson. But the stock apears to be less risky and, when comparing its historical volatility, Bufab Holding AB is 1.29 times less risky than Clas Ohlson. The stock trades about -0.05 of its potential returns per unit of risk. The Clas Ohlson AB is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest  20,789  in Clas Ohlson AB on December 30, 2024 and sell it today you would earn a total of  2,851  from holding Clas Ohlson AB or generate 13.71% 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.  Clas Ohlson AB

Bufab Holding AB

Risk-Adjusted Performance

Very Weak

Over the last 90 days Bufab Holding AB has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Bufab Holding is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

Clas Ohlson AB

Risk-Adjusted Performance

OK

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

Pair Trading with Bufab Holding and Clas Ohlson

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

The idea behind Bufab Holding AB and Clas Ohlson 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 Economic Indicators module to top statistical indicators that provide insights into how an economy is performing.