Correlation Between Energy and Buhler Industries

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

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

Diversification Opportunities for Energy and Buhler Industries

0.0

Correlation Coefficient

Energy  Buhler Industries

Pay attention - limited upside

The 3 months correlation between Energy and Buhler is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding Energy and Water and Buhler Industries in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Buhler Industries and Energy 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 Energy and Water are associated (or correlated) with Buhler Industries. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Buhler Industries has no effect on the direction of Energy i.e., Energy and Buhler Industries go up and down completely randomly.

Pair Corralation between Energy and Buhler Industries

If you would invest  0.38  in Energy and Water on December 29, 2024 and sell it today you would lose (0.16) from holding Energy and Water or give up 42.11% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	95.31%
Values	Daily Returns

Energy and Water  vs.  Buhler Industries

Energy and Water

Risk-Adjusted Performance

Very Weak

Over the last 90 days Energy and Water has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather fragile basic indicators, Energy may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Buhler Industries

Risk-Adjusted Performance

Very Weak

Over the last 90 days Buhler Industries has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Buhler Industries is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Energy and Buhler Industries

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

The idea behind Energy and Water and Buhler Industries 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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.