Correlation Between Buhler Industries and Stella Jones

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

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

Diversification Opportunities for Buhler Industries and Stella Jones

-0.7

Correlation Coefficient

Buhler Industries  Stella Jones

Excellent diversification

The 3 months correlation between Buhler and Stella is -0.7. Overlapping area represents the amount of risk that can be diversified away by holding Buhler Industries and Stella Jones in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Stella Jones 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 Stella Jones. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Stella Jones has no effect on the direction of Buhler Industries i.e., Buhler Industries and Stella Jones go up and down completely randomly.

Pair Corralation between Buhler Industries and Stella Jones

Assuming the 90 days trading horizon Buhler Industries is expected to generate 1.35 times more return on investment than Stella Jones. However, Buhler Industries is 1.35 times more volatile than Stella Jones. It trades about 0.04 of its potential returns per unit of risk. Stella Jones is currently generating about 0.02 per unit of risk. If you would invest  220.00  in Buhler Industries on September 12, 2024 and sell it today you would earn a total of  69.00  from holding Buhler Industries or generate 31.36% return on investment over 90 days.

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

Buhler Industries  vs.  Stella Jones

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.

Stella Jones

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Stella Jones has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unfluctuating performance in the last few months, the Stock's basic indicators remain very healthy which may send shares a bit higher in January 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

Pair Trading with Buhler Industries and Stella Jones

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

The idea behind Buhler Industries and Stella Jones 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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.