Correlation Between Nederman Holding and Bufab Holding

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

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

Diversification Opportunities for Nederman Holding and Bufab Holding

-0.71

Correlation Coefficient

Nederman Holding  Bufab Holding

Pay attention - limited upside

The 3 months correlation between Nederman and Bufab is -0.71. Overlapping area represents the amount of risk that can be diversified away by holding Nederman Holding AB and Bufab Holding AB in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bufab Holding AB and Nederman Holding 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 Nederman Holding AB are associated (or correlated) with Bufab Holding. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Bufab Holding AB has no effect on the direction of Nederman Holding i.e., Nederman Holding and Bufab Holding go up and down completely randomly.

Pair Corralation between Nederman Holding and Bufab Holding

Assuming the 90 days trading horizon Nederman Holding AB is expected to generate 1.59 times more return on investment than Bufab Holding. However, Nederman Holding is 1.59 times more volatile than Bufab Holding AB. It trades about -0.06 of its potential returns per unit of risk. Bufab Holding AB is currently generating about -0.16 per unit of risk. If you would invest  21,950  in Nederman Holding AB on October 5, 2024 and sell it today you would lose (400.00) from holding Nederman Holding AB or give up 1.82% of portfolio value over 90 days.

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

Nederman Holding AB  vs.  Bufab Holding AB

Nederman Holding

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Nederman Holding AB has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Nederman Holding is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

Bufab Holding AB

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Bufab Holding AB are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak basic indicators, Bufab Holding unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Nederman Holding and Bufab Holding

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

The idea behind Nederman Holding AB and Bufab Holding 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 Technical Analysis module to check basic technical indicators and analysis based on most latest market data.