Correlation Between Buffalo Flexible and Buffalo Discovery

Can any of the company-specific risk be diversified away by investing in both Buffalo Flexible and Buffalo Discovery 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 Buffalo Flexible and Buffalo Discovery into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Buffalo Flexible Income and Buffalo Discovery Fund, you can compare the effects of market volatilities on Buffalo Flexible and Buffalo Discovery 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 Buffalo Flexible with a short position of Buffalo Discovery. Check out your portfolio center. Please also check ongoing floating volatility patterns of Buffalo Flexible and Buffalo Discovery.

Diversification Opportunities for Buffalo Flexible and Buffalo Discovery

0.69

Correlation Coefficient

Buffalo Flexible  Buffalo Discovery

Poor diversification

The 3 months correlation between Buffalo and Buffalo is 0.69. Overlapping area represents the amount of risk that can be diversified away by holding Buffalo Flexible Income and Buffalo Discovery Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Buffalo Discovery and Buffalo Flexible 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 Buffalo Flexible Income are associated (or correlated) with Buffalo Discovery. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Buffalo Discovery has no effect on the direction of Buffalo Flexible i.e., Buffalo Flexible and Buffalo Discovery go up and down completely randomly.

Pair Corralation between Buffalo Flexible and Buffalo Discovery

Assuming the 90 days horizon Buffalo Flexible is expected to generate 3.28 times less return on investment than Buffalo Discovery. But when comparing it to its historical volatility, Buffalo Flexible Income is 1.69 times less risky than Buffalo Discovery. It trades about 0.09 of its potential returns per unit of risk. Buffalo Discovery Fund is currently generating about 0.17 of returns per unit of risk over similar time horizon. If you would invest  2,460  in Buffalo Discovery Fund on September 3, 2024 and sell it today you would earn a total of  223.00  from holding Buffalo Discovery Fund or generate 9.07% return on investment over 90 days.

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

Buffalo Flexible Income  vs.  Buffalo Discovery Fund

Buffalo Flexible Income

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Buffalo Flexible Income are ranked lower than 6 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong fundamental drivers, Buffalo Flexible is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Buffalo Discovery

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Buffalo Discovery Fund are ranked lower than 13 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak basic indicators, Buffalo Discovery may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Buffalo Flexible and Buffalo Discovery

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

The idea behind Buffalo Flexible Income and Buffalo Discovery Fund 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 Stock Screener module to find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook..