Correlation Between Cincinnati Financial and BE Semiconductor
Can any of the company-specific risk be diversified away by investing in both Cincinnati Financial 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 Cincinnati Financial and BE Semiconductor into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Cincinnati Financial Corp and BE Semiconductor Industries, you can compare the effects of market volatilities on Cincinnati Financial 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 Cincinnati Financial with a short position of BE Semiconductor. Check out your portfolio center. Please also check ongoing floating volatility patterns of Cincinnati Financial and BE Semiconductor.
Diversification Opportunities for Cincinnati Financial and BE Semiconductor
0.35 | Correlation Coefficient |
Weak diversification
The 3 months correlation between Cincinnati and BSI is 0.35. Overlapping area represents the amount of risk that can be diversified away by holding Cincinnati Financial Corp 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 Cincinnati Financial 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 Cincinnati Financial Corp 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 Cincinnati Financial i.e., Cincinnati Financial and BE Semiconductor go up and down completely randomly.
Pair Corralation between Cincinnati Financial and BE Semiconductor
Assuming the 90 days trading horizon Cincinnati Financial Corp is expected to under-perform the BE Semiconductor. But the stock apears to be less risky and, when comparing its historical volatility, Cincinnati Financial Corp is 1.9 times less risky than BE Semiconductor. The stock trades about -0.25 of its potential returns per unit of risk. The BE Semiconductor Industries is currently generating about 0.35 of returns per unit of risk over similar time horizon. If you would invest 12,355 in BE Semiconductor Industries on October 10, 2024 and sell it today you would earn a total of 2,175 from holding BE Semiconductor Industries or generate 17.6% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Cincinnati Financial Corp vs. BE Semiconductor Industries
Performance |
| Timeline |
| Cincinnati Financial Corp |
| BE Semiconductor Ind |
Cincinnati Financial and BE Semiconductor Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Cincinnati Financial and BE Semiconductor
The main advantage of trading using opposite Cincinnati Financial and BE Semiconductor positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Cincinnati Financial 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.| Cincinnati Financial vs. Mitsubishi Gas Chemical | Cincinnati Financial vs. TIANDE CHEMICAL | Cincinnati Financial vs. Soken Chemical Engineering | Cincinnati Financial vs. TAL Education Group |
| BE Semiconductor vs. DONGJIANG ENVIRONMENTAL H | BE Semiconductor vs. Carnegie Clean Energy | BE Semiconductor vs. Firan Technology Group | BE Semiconductor vs. Tianjin Capital Environmental |
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 Portfolio Center module to all portfolio management and optimization tools to improve performance of your portfolios.
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