Correlation Between Bufab Holding and AB SKF

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

Diversification Opportunities for Bufab Holding and AB SKF

0.55

Correlation Coefficient

Bufab Holding  AB SKF

Very weak diversification

The 3 months correlation between Bufab and SKF-B is 0.55. Overlapping area represents the amount of risk that can be diversified away by holding Bufab Holding AB and AB SKF in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AB SKF 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 AB SKF. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of AB SKF has no effect on the direction of Bufab Holding i.e., Bufab Holding and AB SKF go up and down completely randomly.

Pair Corralation between Bufab Holding and AB SKF

Assuming the 90 days trading horizon Bufab Holding is expected to generate 1.77 times less return on investment than AB SKF. In addition to that, Bufab Holding is 1.2 times more volatile than AB SKF. It trades about 0.09 of its total potential returns per unit of risk. AB SKF is currently generating about 0.19 per unit of volatility. If you would invest  18,245  in AB SKF on September 12, 2024 and sell it today you would earn a total of  4,125  from holding AB SKF or generate 22.61% return on investment over 90 days.

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

Bufab Holding AB  vs.  AB SKF

Bufab Holding AB

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Bufab Holding AB are ranked lower than 7 (%) 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.

AB SKF

Risk-Adjusted Performance

14 of 100

Good

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

Pair Trading with Bufab Holding and AB SKF

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

The idea behind Bufab Holding AB and AB SKF 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 File Import module to quickly import all of your third-party portfolios from your local drive in csv format.