Correlation Between Bufab Holding and Invisio Communications

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

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

Diversification Opportunities for Bufab Holding and Invisio Communications

0.2

Correlation Coefficient

Bufab Holding  Invisio Communications

Modest diversification

The 3 months correlation between Bufab and Invisio is 0.2. Overlapping area represents the amount of risk that can be diversified away by holding Bufab Holding AB and Invisio Communications AB in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Invisio Communications and Bufab 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 Bufab Holding AB are associated (or correlated) with Invisio Communications. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Invisio Communications has no effect on the direction of Bufab Holding i.e., Bufab Holding and Invisio Communications go up and down completely randomly.

Pair Corralation between Bufab Holding and Invisio Communications

Assuming the 90 days trading horizon Bufab Holding AB is expected to under-perform the Invisio Communications. But the stock apears to be less risky and, when comparing its historical volatility, Bufab Holding AB is 1.36 times less risky than Invisio Communications. The stock trades about -0.02 of its potential returns per unit of risk. The Invisio Communications AB is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  23,667  in Invisio Communications AB on March 12, 2024 and sell it today you would earn a total of  1,483  from holding Invisio Communications AB or generate 6.27% return on investment over 90 days.

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

Bufab Holding AB  vs.  Invisio Communications AB

Bufab Holding AB

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Bufab Holding AB are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable fundamental drivers, Bufab Holding is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Invisio Communications

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Invisio Communications AB are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Invisio Communications unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Bufab Holding and Invisio Communications

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

The idea behind Bufab Holding AB and Invisio Communications 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 Portfolio Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.