Correlation Between Buhler Industries and Colonial Coal

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

By analyzing existing cross correlation between Buhler Industries and Colonial Coal International, you can compare the effects of market volatilities on Buhler Industries and Colonial Coal 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 Buhler Industries with a short position of Colonial Coal. Check out your portfolio center. Please also check ongoing floating volatility patterns of Buhler Industries and Colonial Coal.

Diversification Opportunities for Buhler Industries and Colonial Coal

-0.74

Correlation Coefficient

Buhler Industries  Colonial Coal

Pay attention - limited upside

The 3 months correlation between Buhler and Colonial is -0.74. Overlapping area represents the amount of risk that can be diversified away by holding Buhler Industries and Colonial Coal International in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Colonial Coal Intern and Buhler Industries 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 Buhler Industries are associated (or correlated) with Colonial Coal. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Colonial Coal Intern has no effect on the direction of Buhler Industries i.e., Buhler Industries and Colonial Coal go up and down completely randomly.

Pair Corralation between Buhler Industries and Colonial Coal

Assuming the 90 days trading horizon Buhler Industries is expected to generate 0.61 times more return on investment than Colonial Coal. However, Buhler Industries is 1.63 times less risky than Colonial Coal. It trades about 0.24 of its potential returns per unit of risk. Colonial Coal International is currently generating about -0.16 per unit of risk. If you would invest  288.00  in Buhler Industries on October 4, 2024 and sell it today you would earn a total of  27.00  from holding Buhler Industries or generate 9.38% return on investment over 90 days.

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

Buhler Industries  vs.  Colonial Coal International

Buhler Industries

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Buhler Industries are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of very weak forward indicators, Buhler Industries displayed solid returns over the last few months and may actually be approaching a breakup point.

Colonial Coal Intern

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Colonial Coal International has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of abnormal performance in the last few months, the Stock's basic indicators remain fairly stable which may send shares a bit higher in February 2025. The latest fuss may also be a sign of long-term up-swing for the venture sophisticated investors.

Pair Trading with Buhler Industries and Colonial Coal

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

The idea behind Buhler Industries and Colonial Coal International 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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.