Correlation Between BE Semiconductor and EMERSON ELECTRIC
Can any of the company-specific risk be diversified away by investing in both BE Semiconductor and EMERSON ELECTRIC 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 EMERSON ELECTRIC 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 EMERSON ELECTRIC, you can compare the effects of market volatilities on BE Semiconductor and EMERSON ELECTRIC 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 EMERSON ELECTRIC. Check out your portfolio center. Please also check ongoing floating volatility patterns of BE Semiconductor and EMERSON ELECTRIC.
Diversification Opportunities for BE Semiconductor and EMERSON ELECTRIC
0.44 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between BSI and EMERSON is 0.44. Overlapping area represents the amount of risk that can be diversified away by holding BE Semiconductor Industries and EMERSON ELECTRIC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on EMERSON ELECTRIC 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 EMERSON ELECTRIC. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of EMERSON ELECTRIC has no effect on the direction of BE Semiconductor i.e., BE Semiconductor and EMERSON ELECTRIC go up and down completely randomly.
Pair Corralation between BE Semiconductor and EMERSON ELECTRIC
Assuming the 90 days trading horizon BE Semiconductor Industries is expected to generate 2.09 times more return on investment than EMERSON ELECTRIC. However, BE Semiconductor is 2.09 times more volatile than EMERSON ELECTRIC. It trades about 0.19 of its potential returns per unit of risk. EMERSON ELECTRIC is currently generating about 0.14 per unit of risk. If you would invest 11,510 in BE Semiconductor Industries on September 13, 2024 and sell it today you would earn a total of 1,140 from holding BE Semiconductor Industries or generate 9.9% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
BE Semiconductor Industries vs. EMERSON ELECTRIC
Performance |
| Timeline |
| BE Semiconductor Ind |
| EMERSON ELECTRIC |
BE Semiconductor and EMERSON ELECTRIC Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with BE Semiconductor and EMERSON ELECTRIC
The main advantage of trading using opposite BE Semiconductor and EMERSON ELECTRIC positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if BE Semiconductor position performs unexpectedly, EMERSON ELECTRIC 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 EMERSON ELECTRIC will offset losses from the drop in EMERSON ELECTRIC's long position.| BE Semiconductor vs. Apple Inc | BE Semiconductor vs. Apple Inc | BE Semiconductor vs. Apple Inc | BE Semiconductor vs. Apple Inc |
| EMERSON ELECTRIC vs. Australian Agricultural | EMERSON ELECTRIC vs. Singapore Telecommunications Limited | EMERSON ELECTRIC vs. H FARM SPA | EMERSON ELECTRIC vs. North American Construction |
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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.
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