Correlation Between Bufab Holding and Nordic Waterproofing

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

Diversification Opportunities for Bufab Holding and Nordic Waterproofing

-0.05

Correlation Coefficient

Bufab Holding  Nordic Waterproofing

Good diversification

The 3 months correlation between Bufab and Nordic is -0.05. Overlapping area represents the amount of risk that can be diversified away by holding Bufab Holding AB and Nordic Waterproofing Holding in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nordic Waterproofing 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 Nordic Waterproofing. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nordic Waterproofing has no effect on the direction of Bufab Holding i.e., Bufab Holding and Nordic Waterproofing go up and down completely randomly.

Pair Corralation between Bufab Holding and Nordic Waterproofing

Assuming the 90 days trading horizon Bufab Holding AB is expected to under-perform the Nordic Waterproofing. In addition to that, Bufab Holding is 1.28 times more volatile than Nordic Waterproofing Holding. It trades about -0.05 of its total potential returns per unit of risk. Nordic Waterproofing Holding is currently generating about 0.09 per unit of volatility. If you would invest  17,020  in Nordic Waterproofing Holding on December 30, 2024 and sell it today you would earn a total of  1,220  from holding Nordic Waterproofing Holding or generate 7.17% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	93.65%
Values	Daily Returns

Bufab Holding AB  vs.  Nordic Waterproofing Holding

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.

Nordic Waterproofing

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Nordic Waterproofing Holding are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain technical and fundamental indicators, Nordic Waterproofing may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Bufab Holding and Nordic Waterproofing

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

The idea behind Bufab Holding AB and Nordic Waterproofing Holding 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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.