Correlation Between Bufab Holding and Rottneros

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

Diversification Opportunities for Bufab Holding and Rottneros

-0.89

Correlation Coefficient

Bufab Holding  Rottneros

Pay attention - limited upside

The 3 months correlation between Bufab and Rottneros is -0.89. Overlapping area represents the amount of risk that can be diversified away by holding Bufab Holding AB and Rottneros AB in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Rottneros 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 Rottneros. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Rottneros AB has no effect on the direction of Bufab Holding i.e., Bufab Holding and Rottneros go up and down completely randomly.

Pair Corralation between Bufab Holding and Rottneros

Assuming the 90 days trading horizon Bufab Holding AB is expected to generate 1.43 times more return on investment than Rottneros. However, Bufab Holding is 1.43 times more volatile than Rottneros AB. It trades about 0.09 of its potential returns per unit of risk. Rottneros AB is currently generating about -0.09 per unit of risk. If you would invest  33,560  in Bufab Holding AB on September 24, 2024 and sell it today you would earn a total of  9,920  from holding Bufab Holding AB or generate 29.56% return on investment over 90 days.

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

Bufab Holding AB  vs.  Rottneros AB

Bufab Holding AB

Risk-Adjusted Performance

14 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Bufab Holding AB are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Bufab Holding unveiled solid returns over the last few months and may actually be approaching a breakup point.

Rottneros AB

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Rottneros AB has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest uncertain performance, the Stock's basic indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

Pair Trading with Bufab Holding and Rottneros

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

The idea behind Bufab Holding AB and Rottneros 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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.