Correlation Between Bucher Industries and Elma Electronic

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

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

Diversification Opportunities for Bucher Industries and Elma Electronic

-0.55

Correlation Coefficient

Bucher Industries  Elma Electronic

Excellent diversification

The 3 months correlation between Bucher and Elma is -0.55. Overlapping area represents the amount of risk that can be diversified away by holding Bucher Industries AG and Elma Electronic AG in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Elma Electronic AG and Bucher 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 Bucher Industries AG are associated (or correlated) with Elma Electronic. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Elma Electronic AG has no effect on the direction of Bucher Industries i.e., Bucher Industries and Elma Electronic go up and down completely randomly.

Pair Corralation between Bucher Industries and Elma Electronic

Assuming the 90 days trading horizon Bucher Industries AG is expected to under-perform the Elma Electronic. In addition to that, Bucher Industries is 1.45 times more volatile than Elma Electronic AG. It trades about -0.19 of its total potential returns per unit of risk. Elma Electronic AG is currently generating about 0.22 per unit of volatility. If you would invest  102,000  in Elma Electronic AG on September 25, 2024 and sell it today you would earn a total of  3,000  from holding Elma Electronic AG or generate 2.94% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	26.56%
Values	Daily Returns

Bucher Industries AG  vs.  Elma Electronic AG

Bucher Industries

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Bucher Industries AG has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of abnormal performance in the last few months, the Stock's basic indicators remain fairly stable which may send shares a bit higher in January 2025. The latest fuss may also be a sign of long-term up-swing for the venture sophisticated investors.

Elma Electronic AG

Risk-Adjusted Performance

0 of 100

Solid

Over the last 90 days Elma Electronic AG has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly abnormal basic indicators, Elma Electronic may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Bucher Industries and Elma Electronic

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

The idea behind Bucher Industries AG and Elma Electronic AG 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 File Import module to quickly import all of your third-party portfolios from your local drive in csv format.