Correlation Between Basic Fit and BE Semiconductor

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

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

Diversification Opportunities for Basic Fit and BE Semiconductor

-0.4

Correlation Coefficient

Basic Fit  BE Semiconductor

Very good diversification

The 3 months correlation between Basic and BESI is -0.4. Overlapping area represents the amount of risk that can be diversified away by holding Basic Fit NV and BE Semiconductor Industries in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BE Semiconductor Ind and Basic Fit 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 Basic Fit NV are associated (or correlated) with BE Semiconductor. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BE Semiconductor Ind has no effect on the direction of Basic Fit i.e., Basic Fit and BE Semiconductor go up and down completely randomly.

Pair Corralation between Basic Fit and BE Semiconductor

Assuming the 90 days trading horizon Basic Fit NV is expected to under-perform the BE Semiconductor. But the stock apears to be less risky and, when comparing its historical volatility, Basic Fit NV is 1.54 times less risky than BE Semiconductor. The stock trades about -0.05 of its potential returns per unit of risk. The BE Semiconductor Industries is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest  11,160  in BE Semiconductor Industries on September 20, 2024 and sell it today you would earn a total of  1,995  from holding BE Semiconductor Industries or generate 17.88% return on investment over 90 days.

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

Basic Fit NV  vs.  BE Semiconductor Industries

Basic Fit NV

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Basic Fit NV has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Basic Fit is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

BE Semiconductor Ind

Risk-Adjusted Performance

8 of 100

OK

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.

Pair Trading with Basic Fit and BE Semiconductor

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

The idea behind Basic Fit NV and BE Semiconductor Industries 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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.