Correlation Between BE Semiconductor and Microsoft
Can any of the company-specific risk be diversified away by investing in both BE Semiconductor and Microsoft 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 Microsoft 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 Microsoft, you can compare the effects of market volatilities on BE Semiconductor and Microsoft 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 Microsoft. Check out your portfolio center. Please also check ongoing floating volatility patterns of BE Semiconductor and Microsoft.
Diversification Opportunities for BE Semiconductor and Microsoft
0.77 | Correlation Coefficient |
Poor diversification
The 3 months correlation between BSI and Microsoft is 0.77. Overlapping area represents the amount of risk that can be diversified away by holding BE Semiconductor Industries and Microsoft in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Microsoft 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 Microsoft. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Microsoft has no effect on the direction of BE Semiconductor i.e., BE Semiconductor and Microsoft go up and down completely randomly.
Pair Corralation between BE Semiconductor and Microsoft
Assuming the 90 days trading horizon BE Semiconductor Industries is expected to generate 1.51 times more return on investment than Microsoft. However, BE Semiconductor is 1.51 times more volatile than Microsoft. It trades about 0.44 of its potential returns per unit of risk. Microsoft is currently generating about 0.27 per unit of risk. If you would invest 10,785 in BE Semiconductor Industries on September 22, 2024 and sell it today you would earn a total of 1,895 from holding BE Semiconductor Industries or generate 17.57% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
BE Semiconductor Industries vs. Microsoft
Performance |
| Timeline |
| BE Semiconductor Ind |
| Microsoft |
BE Semiconductor and Microsoft Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with BE Semiconductor and Microsoft
The main advantage of trading using opposite BE Semiconductor and Microsoft positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if BE Semiconductor position performs unexpectedly, Microsoft 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 Microsoft will offset losses from the drop in Microsoft's long position.| BE Semiconductor vs. Apple Inc | BE Semiconductor vs. Apple Inc | BE Semiconductor vs. Apple Inc | BE Semiconductor vs. Apple Inc |
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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.
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