Can any of the company-specific risk be diversified away by investing in both Ascom Holding and Bucher Industries 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 Ascom Holding and Bucher Industries into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Ascom Holding AG and Bucher Industries AG, you can compare the effects of market volatilities on Ascom Holding and Bucher Industries 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 Ascom Holding with a short position of Bucher Industries. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ascom Holding and Bucher Industries.
Diversification Opportunities for Ascom Holding and Bucher Industries
The 3 months correlation between Ascom and Bucher is 0.45. Overlapping area represents the amount of risk that can be diversified away by holding Ascom Holding AG and Bucher Industries AG in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bucher Industries and Ascom 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 Ascom Holding AG are associated (or correlated) with Bucher Industries. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Bucher Industries has no effect on the direction of Ascom Holding i.e., Ascom Holding and Bucher Industries go up and down completely randomly.
Pair Corralation between Ascom Holding and Bucher Industries
Assuming the 90 days trading horizon Ascom Holding AG is expected to generate 1.63 times more return on investment than Bucher Industries. However, Ascom Holding is 1.63 times more volatile than Bucher Industries AG. It trades about 0.08 of its potential returns per unit of risk. Bucher Industries AG is currently generating about -0.05 per unit of risk. If you would invest 759.00 in Ascom Holding AG on March 6, 2024 and sell it today you would earn a total of 55.00 from holding Ascom Holding AG or generate 7.25% return on investment over 90 days.
Compared to the overall equity markets, risk-adjusted returns on investments in Ascom Holding AG are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Ascom Holding may actually be approaching a critical reversion point that can send shares even higher in July 2024.
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.