Correlation Between Buhler Industries and Capital Power
Can any of the company-specific risk be diversified away by investing in both Buhler Industries and Capital Power 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 Capital Power into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Buhler Industries and Capital Power, you can compare the effects of market volatilities on Buhler Industries and Capital Power 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 Capital Power. Check out your portfolio center. Please also check ongoing floating volatility patterns of Buhler Industries and Capital Power.
Diversification Opportunities for Buhler Industries and Capital Power
0.85 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Buhler and Capital is 0.85. Overlapping area represents the amount of risk that can be diversified away by holding Buhler Industries and Capital Power in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Capital Power 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 Capital Power. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Capital Power has no effect on the direction of Buhler Industries i.e., Buhler Industries and Capital Power go up and down completely randomly.
Pair Corralation between Buhler Industries and Capital Power
Assuming the 90 days trading horizon Buhler Industries is expected to generate 0.82 times more return on investment than Capital Power. However, Buhler Industries is 1.21 times less risky than Capital Power. It trades about 0.19 of its potential returns per unit of risk. Capital Power is currently generating about 0.11 per unit of risk. If you would invest 288.00 in Buhler Industries on October 5, 2024 and sell it today you would earn a total of 22.00 from holding Buhler Industries or generate 7.64% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Strong |
Accuracy | 95.0% |
Values | Daily Returns |
Buhler Industries vs. Capital Power
Performance |
Timeline |
Buhler Industries |
Capital Power |
Buhler Industries and Capital Power Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Buhler Industries and Capital Power
The main advantage of trading using opposite Buhler Industries and Capital Power positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Buhler Industries position performs unexpectedly, Capital Power 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 Capital Power will offset losses from the drop in Capital Power's long position.Buhler Industries vs. Clarke Inc | Buhler Industries vs. Accord Financial Corp | Buhler Industries vs. ADF Group | Buhler Industries vs. Algoma Central |
Capital Power vs. Fortis Inc | Capital Power vs. Canadian Utilities Limited | Capital Power vs. TC Energy Corp | Capital Power vs. Algonquin Power Utilities |
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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..
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