Correlation Between Magna International and BE Semiconductor
Can any of the company-specific risk be diversified away by investing in both Magna International 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 Magna International and BE Semiconductor into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Magna International and BE Semiconductor Industries, you can compare the effects of market volatilities on Magna International 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 Magna International with a short position of BE Semiconductor. Check out your portfolio center. Please also check ongoing floating volatility patterns of Magna International and BE Semiconductor.
Diversification Opportunities for Magna International and BE Semiconductor
0.13 | Correlation Coefficient |
Average diversification
The 3 months correlation between Magna and BSI is 0.13. Overlapping area represents the amount of risk that can be diversified away by holding Magna International 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 Magna International 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 Magna International 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 Magna International i.e., Magna International and BE Semiconductor go up and down completely randomly.
Pair Corralation between Magna International and BE Semiconductor
Assuming the 90 days horizon Magna International is expected to under-perform the BE Semiconductor. But the stock apears to be less risky and, when comparing its historical volatility, Magna International is 1.51 times less risky than BE Semiconductor. The stock trades about -0.01 of its potential returns per unit of risk. The BE Semiconductor Industries is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest 5,781 in BE Semiconductor Industries on September 4, 2024 and sell it today you would earn a total of 5,379 from holding BE Semiconductor Industries or generate 93.05% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Magna International vs. BE Semiconductor Industries
Performance |
| Timeline |
| Magna International |
| BE Semiconductor Ind |
Magna International and BE Semiconductor Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Magna International and BE Semiconductor
The main advantage of trading using opposite Magna International and BE Semiconductor positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Magna International 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.| Magna International vs. Dno ASA | Magna International vs. PT Astra International | Magna International vs. Superior Plus Corp | Magna International vs. NMI Holdings |
| 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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.
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