Correlation Between Bambuser and Essity AB

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

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

Diversification Opportunities for Bambuser and Essity AB

0.79

Correlation Coefficient

Bambuser  Essity AB

Poor diversification

The 3 months correlation between Bambuser and Essity is 0.79. Overlapping area represents the amount of risk that can be diversified away by holding Bambuser AB and Essity AB in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Essity AB and Bambuser 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 Bambuser AB are associated (or correlated) with Essity AB. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Essity AB has no effect on the direction of Bambuser i.e., Bambuser and Essity AB go up and down completely randomly.

Pair Corralation between Bambuser and Essity AB

Assuming the 90 days trading horizon Bambuser AB is expected to under-perform the Essity AB. In addition to that, Bambuser is 5.09 times more volatile than Essity AB. It trades about -0.03 of its total potential returns per unit of risk. Essity AB is currently generating about 0.02 per unit of volatility. If you would invest  26,596  in Essity AB on October 13, 2024 and sell it today you would earn a total of  2,614  from holding Essity AB or generate 9.83% return on investment over 90 days.

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

Bambuser AB  vs.  Essity AB

Bambuser AB

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Bambuser AB has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of uncertain performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in February 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Essity AB

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Essity AB has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest uncertain performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Pair Trading with Bambuser and Essity AB

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

The idea behind Bambuser AB and Essity AB 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 Dashboard module to portfolio dashboard that provides centralized access to all your investments.