Correlation Between SPTSX Dividend and Buhler Industries

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

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

Diversification Opportunities for SPTSX Dividend and Buhler Industries

-0.5

Correlation Coefficient

SPTSX Dividend  Buhler Industries

Very good diversification

The 3 months correlation between SPTSX and Buhler is -0.5. Overlapping area represents the amount of risk that can be diversified away by holding SPTSX Dividend Aristocrats and Buhler Industries in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Buhler Industries and SPTSX Dividend 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 SPTSX Dividend Aristocrats 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 SPTSX Dividend i.e., SPTSX Dividend and Buhler Industries go up and down completely randomly.

Pair Corralation between SPTSX Dividend and Buhler Industries

Assuming the 90 days trading horizon SPTSX Dividend Aristocrats is expected to under-perform the Buhler Industries. But the index apears to be less risky and, when comparing its historical volatility, SPTSX Dividend Aristocrats is 24.34 times less risky than Buhler Industries. The index trades about -0.02 of its potential returns per unit of risk. The Buhler Industries is currently generating about 0.15 of returns per unit of risk over similar time horizon. If you would invest  288.00  in Buhler Industries on December 29, 2024 and sell it today you would earn a total of  439.00  from holding Buhler Industries or generate 152.43% return on investment over 90 days.

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

SPTSX Dividend Aristocrats  vs.  Buhler Industries

Pair Trading with SPTSX Dividend and Buhler Industries

The main advantage of trading using opposite SPTSX Dividend and Buhler Industries positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if SPTSX Dividend 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 SPTSX Dividend Aristocrats 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.