Correlation Between SBB-B and Bufab Holding

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

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

Diversification Opportunities for SBB-B and Bufab Holding

-0.9

Correlation Coefficient

SBB-B  Bufab Holding

Pay attention - limited upside

The 3 months correlation between SBB-B and Bufab is -0.9. Overlapping area represents the amount of risk that can be diversified away by holding Samhllsbyggnadsbolaget i Norde 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 SBB-B 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 Samhllsbyggnadsbolaget i Norden 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 SBB-B i.e., SBB-B and Bufab Holding go up and down completely randomly.

Pair Corralation between SBB-B and Bufab Holding

Assuming the 90 days trading horizon Samhllsbyggnadsbolaget i Norden is expected to under-perform the Bufab Holding. In addition to that, SBB-B is 3.31 times more volatile than Bufab Holding AB. It trades about -0.1 of its total potential returns per unit of risk. Bufab Holding AB is currently generating about 0.23 per unit of volatility. If you would invest  36,480  in Bufab Holding AB on September 23, 2024 and sell it today you would earn a total of  7,000  from holding Bufab Holding AB or generate 19.19% return on investment over 90 days.

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

Samhllsbyggnadsbolaget i Norde  vs.  Bufab Holding AB

Samhllsbyggnadsbolaget

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Samhllsbyggnadsbolaget i Norden 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 January 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Bufab Holding AB

Risk-Adjusted Performance

17 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Bufab Holding AB are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Bufab Holding unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with SBB-B and Bufab Holding

The main advantage of trading using opposite SBB-B and Bufab Holding positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if SBB-B 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 Samhllsbyggnadsbolaget i Norden 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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.