Correlation Between BE Semiconductor and Big 5

Can any of the company-specific risk be diversified away by investing in both BE Semiconductor and Big 5 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 Big 5 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 Big 5 Sporting, you can compare the effects of market volatilities on BE Semiconductor and Big 5 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 Big 5. Check out your portfolio center. Please also check ongoing floating volatility patterns of BE Semiconductor and Big 5.

Diversification Opportunities for BE Semiconductor and Big 5

-0.02

Correlation Coefficient

BE Semiconductor  Big 5

Good diversification

The 3 months correlation between BSI and Big is -0.02. Overlapping area represents the amount of risk that can be diversified away by holding BE Semiconductor Industries and Big 5 Sporting in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Big 5 Sporting 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 Big 5. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Big 5 Sporting has no effect on the direction of BE Semiconductor i.e., BE Semiconductor and Big 5 go up and down completely randomly.

Pair Corralation between BE Semiconductor and Big 5

Assuming the 90 days trading horizon BE Semiconductor Industries is expected to generate 0.59 times more return on investment than Big 5. However, BE Semiconductor Industries is 1.69 times less risky than Big 5. It trades about 0.01 of its potential returns per unit of risk. Big 5 Sporting is currently generating about -0.04 per unit of risk. If you would invest  13,612  in BE Semiconductor Industries on September 20, 2024 and sell it today you would lose (747.00) from holding BE Semiconductor Industries or give up 5.49% of portfolio value over 90 days.

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

BE Semiconductor Industries  vs.  Big 5 Sporting

BE Semiconductor Ind

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in BE Semiconductor Industries are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, BE Semiconductor unveiled solid returns over the last few months and may actually be approaching a breakup point.

Big 5 Sporting

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Big 5 Sporting are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Big 5 reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with BE Semiconductor and Big 5

The main advantage of trading using opposite BE Semiconductor and Big 5 positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if BE Semiconductor position performs unexpectedly, Big 5 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 Big 5 will offset losses from the drop in Big 5's long position.

The idea behind BE Semiconductor Industries and Big 5 Sporting 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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.