Correlation Between BE Semiconductor and CVC Capital

Can any of the company-specific risk be diversified away by investing in both BE Semiconductor and CVC Capital 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 BE Semiconductor and CVC Capital into the same portfolio, which is an essential part of the fundamental portfolio management process.

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

Diversification Opportunities for BE Semiconductor and CVC Capital

0.59

Correlation Coefficient

BE Semiconductor  CVC Capital

Very weak diversification

The 3 months correlation between BESI and CVC is 0.59. Overlapping area represents the amount of risk that can be diversified away by holding BE Semiconductor Industries and CVC Capital Partners in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CVC Capital Partners and BE Semiconductor 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 BE Semiconductor Industries are associated (or correlated) with CVC Capital. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CVC Capital Partners has no effect on the direction of BE Semiconductor i.e., BE Semiconductor and CVC Capital go up and down completely randomly.

Pair Corralation between BE Semiconductor and CVC Capital

Assuming the 90 days trading horizon BE Semiconductor Industries is expected to generate 1.66 times more return on investment than CVC Capital. However, BE Semiconductor is 1.66 times more volatile than CVC Capital Partners. It trades about 0.08 of its potential returns per unit of risk. CVC Capital Partners is currently generating about 0.11 per unit of risk. If you would invest  5,370  in BE Semiconductor Industries on September 20, 2024 and sell it today you would earn a total of  7,785  from holding BE Semiconductor Industries or generate 144.97% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	33.27%
Values	Daily Returns

BE Semiconductor Industries  vs.  CVC Capital Partners

BE Semiconductor Ind

Risk-Adjusted Performance

8 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in BE Semiconductor Industries are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak basic indicators, BE Semiconductor unveiled solid returns over the last few months and may actually be approaching a breakup point.

CVC Capital Partners

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in CVC Capital Partners are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain fundamental indicators, CVC Capital may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with BE Semiconductor and CVC Capital

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

The idea behind BE Semiconductor Industries and CVC Capital Partners 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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.