Correlation Between BE Semiconductor and Universal Music
Can any of the company-specific risk be diversified away by investing in both BE Semiconductor and Universal Music 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 Universal Music 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 Universal Music Group, you can compare the effects of market volatilities on BE Semiconductor and Universal Music 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 Universal Music. Check out your portfolio center. Please also check ongoing floating volatility patterns of BE Semiconductor and Universal Music.
Diversification Opportunities for BE Semiconductor and Universal Music
-0.21 | Correlation Coefficient |
Very good diversification
The 3 months correlation between BESI and Universal is -0.21. Overlapping area represents the amount of risk that can be diversified away by holding BE Semiconductor Industries and Universal Music Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Universal Music Group 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 Universal Music. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Universal Music Group has no effect on the direction of BE Semiconductor i.e., BE Semiconductor and Universal Music go up and down completely randomly.
Pair Corralation between BE Semiconductor and Universal Music
Assuming the 90 days trading horizon BE Semiconductor Industries is expected to generate 1.28 times more return on investment than Universal Music. However, BE Semiconductor is 1.28 times more volatile than Universal Music Group. It trades about -0.02 of its potential returns per unit of risk. Universal Music Group is currently generating about -0.06 per unit of risk. If you would invest 13,315 in BE Semiconductor Industries on September 1, 2024 and sell it today you would lose (2,015) from holding BE Semiconductor Industries or give up 15.13% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 99.24% |
| Values | Daily Returns |
BE Semiconductor Industries vs. Universal Music Group
Performance |
| Timeline |
| BE Semiconductor Ind |
| Universal Music Group |
BE Semiconductor and Universal Music Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with BE Semiconductor and Universal Music
The main advantage of trading using opposite BE Semiconductor and Universal Music positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if BE Semiconductor position performs unexpectedly, Universal Music 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 Universal Music will offset losses from the drop in Universal Music's long position.| BE Semiconductor vs. ASM International NV | BE Semiconductor vs. ASML Holding NV | BE Semiconductor vs. ASR Nederland NV | BE Semiconductor vs. Koninklijke Ahold Delhaize |
| Universal Music vs. Vivendi SA | Universal Music vs. Prosus NV | Universal Music vs. Pershing Square Holdings | Universal Music vs. Adyen NV |
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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.
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