Correlation Between Sulzer AG and Burckhardt Compression

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

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

Diversification Opportunities for Sulzer AG and Burckhardt Compression

-0.16

Correlation Coefficient

Sulzer AG  Burckhardt Compression

Good diversification

The 3 months correlation between Sulzer and Burckhardt is -0.16. Overlapping area represents the amount of risk that can be diversified away by holding Sulzer AG and Burckhardt Compression in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Burckhardt Compression and Sulzer AG 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 Sulzer AG are associated (or correlated) with Burckhardt Compression. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Burckhardt Compression has no effect on the direction of Sulzer AG i.e., Sulzer AG and Burckhardt Compression go up and down completely randomly.

Pair Corralation between Sulzer AG and Burckhardt Compression

Assuming the 90 days trading horizon Sulzer AG is expected to generate 1.31 times less return on investment than Burckhardt Compression. But when comparing it to its historical volatility, Sulzer AG is 1.09 times less risky than Burckhardt Compression. It trades about 0.07 of its potential returns per unit of risk. Burckhardt Compression is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest  64,300  in Burckhardt Compression on October 20, 2024 and sell it today you would earn a total of  4,600  from holding Burckhardt Compression or generate 7.15% return on investment over 90 days.

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

Sulzer AG  vs.  Burckhardt Compression

Sulzer AG

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Sulzer AG are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of fairly stable basic indicators, Sulzer AG is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Burckhardt Compression

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Burckhardt Compression are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Burckhardt Compression may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Sulzer AG and Burckhardt Compression

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

The idea behind Sulzer AG and Burckhardt Compression 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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.