Correlation Between Buhler Industries and Playgon Games

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

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

Diversification Opportunities for Buhler Industries and Playgon Games

-0.74

Correlation Coefficient

Buhler Industries  Playgon Games

Pay attention - limited upside

The 3 months correlation between Buhler and Playgon is -0.74. Overlapping area represents the amount of risk that can be diversified away by holding Buhler Industries and Playgon Games in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Playgon Games and Buhler Industries 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 Buhler Industries are associated (or correlated) with Playgon Games. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Playgon Games has no effect on the direction of Buhler Industries i.e., Buhler Industries and Playgon Games go up and down completely randomly.

Pair Corralation between Buhler Industries and Playgon Games

Assuming the 90 days trading horizon Buhler Industries is expected to generate 2.44 times less return on investment than Playgon Games. But when comparing it to its historical volatility, Buhler Industries is 8.23 times less risky than Playgon Games. It trades about 0.21 of its potential returns per unit of risk. Playgon Games is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  2.00  in Playgon Games on September 9, 2024 and sell it today you would lose (1.00) from holding Playgon Games or give up 50.0% of portfolio value over 90 days.

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

Buhler Industries  vs.  Playgon Games

Buhler Industries

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Buhler Industries are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating forward indicators, Buhler Industries displayed solid returns over the last few months and may actually be approaching a breakup point.

Playgon Games

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Playgon Games are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Playgon Games showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Buhler Industries and Playgon Games

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

The idea behind Buhler Industries and Playgon Games 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 Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.