Correlation Between Cummins and BE Semiconductor
Can any of the company-specific risk be diversified away by investing in both Cummins 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 Cummins and BE Semiconductor into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Cummins and BE Semiconductor Industries, you can compare the effects of market volatilities on Cummins 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 Cummins with a short position of BE Semiconductor. Check out your portfolio center. Please also check ongoing floating volatility patterns of Cummins and BE Semiconductor.
Diversification Opportunities for Cummins and BE Semiconductor
0.44 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Cummins and BSI is 0.44. Overlapping area represents the amount of risk that can be diversified away by holding Cummins 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 Cummins 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 Cummins 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 Cummins i.e., Cummins and BE Semiconductor go up and down completely randomly.
Pair Corralation between Cummins and BE Semiconductor
Assuming the 90 days horizon Cummins is expected to generate 2.65 times less return on investment than BE Semiconductor. But when comparing it to its historical volatility, Cummins is 1.91 times less risky than BE Semiconductor. It trades about 0.19 of its potential returns per unit of risk. BE Semiconductor Industries is currently generating about 0.27 of returns per unit of risk over similar time horizon. If you would invest 9,792 in BE Semiconductor Industries on October 24, 2024 and sell it today you would earn a total of 4,773 from holding BE Semiconductor Industries or generate 48.74% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 98.33% |
| Values | Daily Returns |
Cummins vs. BE Semiconductor Industries
Performance |
| Timeline |
| Cummins |
| BE Semiconductor Ind |
Cummins and BE Semiconductor Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Cummins and BE Semiconductor
The main advantage of trading using opposite Cummins and BE Semiconductor positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Cummins 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.| Cummins vs. ADRIATIC METALS LS 013355 | Cummins vs. SIERRA METALS | Cummins vs. DAIDO METAL TD | Cummins vs. Osisko Metals |
| BE Semiconductor vs. T Mobile | BE Semiconductor vs. Mobilezone Holding AG | BE Semiconductor vs. MOBILE FACTORY INC | BE Semiconductor vs. Kingdee International Software |
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 Content Syndication module to quickly integrate customizable finance content to your own investment portal.
Other Complementary Tools
| Portfolio Backtesting Avoid under-diversification and over-optimization by backtesting your portfolios | |
| CEOs Directory Screen CEOs from public companies around the world | |
| ETF Categories List of ETF categories grouped based on various criteria, such as the investment strategy or type of investments | |
| Portfolio Diagnostics Use generated alerts and portfolio events aggregator to diagnose current holdings | |
| Stocks Directory Find actively traded stocks across global markets |