Correlation Between Buffalo Growth and Buffalo Early

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

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

Diversification Opportunities for Buffalo Growth and Buffalo Early

0.9

Correlation Coefficient

Buffalo Growth  Buffalo Early

Almost no diversification

The 3 months correlation between Buffalo and Buffalo is 0.9. Overlapping area represents the amount of risk that can be diversified away by holding Buffalo Growth Fund and Buffalo Early Stage in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Buffalo Early Stage and Buffalo Growth 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 Growth Fund are associated (or correlated) with Buffalo Early. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Buffalo Early Stage has no effect on the direction of Buffalo Growth i.e., Buffalo Growth and Buffalo Early go up and down completely randomly.

Pair Corralation between Buffalo Growth and Buffalo Early

Assuming the 90 days horizon Buffalo Growth Fund is expected to generate 1.23 times more return on investment than Buffalo Early. However, Buffalo Growth is 1.23 times more volatile than Buffalo Early Stage. It trades about -0.08 of its potential returns per unit of risk. Buffalo Early Stage is currently generating about -0.12 per unit of risk. If you would invest  3,542  in Buffalo Growth Fund on December 27, 2024 and sell it today you would lose (211.00) from holding Buffalo Growth Fund or give up 5.96% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Strong
Accuracy	98.36%
Values	Daily Returns

Buffalo Growth Fund  vs.  Buffalo Early Stage

Buffalo Growth

Risk-Adjusted Performance

Very Weak

Over the last 90 days Buffalo Growth Fund has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong technical and fundamental indicators, Buffalo Growth is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Buffalo Early Stage

Risk-Adjusted Performance

Very Weak

Over the last 90 days Buffalo Early Stage has generated negative risk-adjusted returns adding no value to fund investors. In spite of latest weak performance, the Fund's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the fund investors.

Pair Trading with Buffalo Growth and Buffalo Early

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

The idea behind Buffalo Growth Fund and Buffalo Early Stage 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.

Check out your portfolio center.

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.