Correlation Between Bucher Industries and Bergbahnen Engelberg

Can any of the company-specific risk be diversified away by investing in both Bucher Industries and Bergbahnen Engelberg 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 Bergbahnen Engelberg 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 Bergbahnen Engelberg Truebsee, you can compare the effects of market volatilities on Bucher Industries and Bergbahnen Engelberg 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 Bergbahnen Engelberg. Check out your portfolio center. Please also check ongoing floating volatility patterns of Bucher Industries and Bergbahnen Engelberg.

Diversification Opportunities for Bucher Industries and Bergbahnen Engelberg

0.71

Correlation Coefficient

Bucher Industries  Bergbahnen Engelberg

Poor diversification

The 3 months correlation between Bucher and Bergbahnen is 0.71. Overlapping area represents the amount of risk that can be diversified away by holding Bucher Industries AG and Bergbahnen Engelberg Truebsee in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bergbahnen Engelberg 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 Bergbahnen Engelberg. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Bergbahnen Engelberg has no effect on the direction of Bucher Industries i.e., Bucher Industries and Bergbahnen Engelberg go up and down completely randomly.

Pair Corralation between Bucher Industries and Bergbahnen Engelberg

Assuming the 90 days trading horizon Bucher Industries AG is expected to generate 1.65 times more return on investment than Bergbahnen Engelberg. However, Bucher Industries is 1.65 times more volatile than Bergbahnen Engelberg Truebsee. It trades about -0.06 of its potential returns per unit of risk. Bergbahnen Engelberg Truebsee is currently generating about -0.13 per unit of risk. If you would invest  35,100  in Bucher Industries AG on September 14, 2024 and sell it today you would lose (1,750) from holding Bucher Industries AG or give up 4.99% of portfolio value over 90 days.

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

Bucher Industries AG  vs.  Bergbahnen Engelberg Truebsee

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 fairly stable basic indicators, Bucher Industries is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Bergbahnen Engelberg

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Bergbahnen Engelberg Truebsee has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable basic indicators, Bergbahnen Engelberg is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Pair Trading with Bucher Industries and Bergbahnen Engelberg

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

The idea behind Bucher Industries AG and Bergbahnen Engelberg Truebsee 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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.