Correlation Between Eco Animal and BE Semiconductor

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

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

Diversification Opportunities for Eco Animal and BE Semiconductor

0.01

Correlation Coefficient

Eco Animal  BE Semiconductor

Significant diversification

The 3 months correlation between Eco and 0XVE is 0.01. Overlapping area represents the amount of risk that can be diversified away by holding Eco Animal Health 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 Eco Animal 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 Eco Animal Health 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 Eco Animal i.e., Eco Animal and BE Semiconductor go up and down completely randomly.

Pair Corralation between Eco Animal and BE Semiconductor

Assuming the 90 days trading horizon Eco Animal Health is expected to under-perform the BE Semiconductor. In addition to that, Eco Animal is 1.37 times more volatile than BE Semiconductor Industries. It trades about -0.14 of its total potential returns per unit of risk. BE Semiconductor Industries is currently generating about 0.06 per unit of volatility. If you would invest  11,700  in BE Semiconductor Industries on September 19, 2024 and sell it today you would earn a total of  1,135  from holding BE Semiconductor Industries or generate 9.7% return on investment over 90 days.

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

Eco Animal Health  vs.  BE Semiconductor Industries

Eco Animal Health

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Eco Animal Health has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of uncertain performance in the last few months, the Stock's technical and fundamental indicators remain rather sound which may send shares a bit higher in January 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

BE Semiconductor Ind

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in BE Semiconductor Industries are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unsteady basic indicators, BE Semiconductor may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Eco Animal and BE Semiconductor

The main advantage of trading using opposite Eco Animal and BE Semiconductor positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Eco Animal 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 Eco Animal Health 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.

Check out your portfolio center.

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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .