Correlation Between United Utilities and BE Semiconductor
Can any of the company-specific risk be diversified away by investing in both United Utilities 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 United Utilities and BE Semiconductor into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between United Utilities Group and BE Semiconductor Industries, you can compare the effects of market volatilities on United Utilities 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 United Utilities with a short position of BE Semiconductor. Check out your portfolio center. Please also check ongoing floating volatility patterns of United Utilities and BE Semiconductor.
Diversification Opportunities for United Utilities and BE Semiconductor
0.35 | Correlation Coefficient |
Weak diversification
The 3 months correlation between United and 0XVE is 0.35. Overlapping area represents the amount of risk that can be diversified away by holding United Utilities Group 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 United Utilities 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 United Utilities Group 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 United Utilities i.e., United Utilities and BE Semiconductor go up and down completely randomly.
Pair Corralation between United Utilities and BE Semiconductor
Assuming the 90 days trading horizon United Utilities is expected to generate 3.29 times less return on investment than BE Semiconductor. But when comparing it to its historical volatility, United Utilities Group is 2.2 times less risky than BE Semiconductor. It trades about 0.05 of its potential returns per unit of risk. BE Semiconductor Industries is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest 11,210 in BE Semiconductor Industries on September 12, 2024 and sell it today you would earn a total of 1,415 from holding BE Semiconductor Industries or generate 12.62% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 98.46% |
| Values | Daily Returns |
United Utilities Group vs. BE Semiconductor Industries
Performance |
| Timeline |
| United Utilities |
| BE Semiconductor Ind |
United Utilities and BE Semiconductor Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with United Utilities and BE Semiconductor
The main advantage of trading using opposite United Utilities and BE Semiconductor positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if United Utilities 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.| United Utilities vs. Toyota Motor Corp | United Utilities vs. SoftBank Group Corp | United Utilities vs. OTP Bank Nyrt | United Utilities vs. Hartford Financial Services |
| BE Semiconductor vs. Symphony Environmental Technologies | BE Semiconductor vs. Take Two Interactive Software | BE Semiconductor vs. TechnipFMC PLC | BE Semiconductor vs. Vitec Software Group |
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 Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.
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