Correlation Between Apple and BE Semiconductor

Can any of the company-specific risk be diversified away by investing in both Apple 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 Apple and BE Semiconductor into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Apple Inc and BE Semiconductor Industries, you can compare the effects of market volatilities on Apple 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 Apple with a short position of BE Semiconductor. Check out your portfolio center. Please also check ongoing floating volatility patterns of Apple and BE Semiconductor.

Diversification Opportunities for Apple and BE Semiconductor

0.81

Correlation Coefficient

Apple  BE Semiconductor

Very poor diversification

The 3 months correlation between Apple and BSI is 0.81. Overlapping area represents the amount of risk that can be diversified away by holding Apple Inc 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 Apple 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 Apple Inc 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 Apple i.e., Apple and BE Semiconductor go up and down completely randomly.

Pair Corralation between Apple and BE Semiconductor

Assuming the 90 days trading horizon Apple is expected to generate 1.39 times less return on investment than BE Semiconductor. But when comparing it to its historical volatility, Apple Inc is 2.18 times less risky than BE Semiconductor. It trades about 0.1 of its potential returns per unit of risk. BE Semiconductor Industries is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  6,215  in BE Semiconductor Industries on October 5, 2024 and sell it today you would earn a total of  6,990  from holding BE Semiconductor Industries or generate 112.47% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	100.0%
Values	Daily Returns

Apple Inc  vs.  BE Semiconductor Industries

Apple Inc

Risk-Adjusted Performance

0 of 100

Solid

Over the last 90 days Apple Inc has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively fragile basic indicators, Apple unveiled solid returns over the last few months and may actually be approaching a breakup point.

BE Semiconductor Ind

Risk-Adjusted Performance

0 of 100

OK

Over the last 90 days BE Semiconductor Industries has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively fragile basic indicators, BE Semiconductor unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Apple and BE Semiconductor

The main advantage of trading using opposite Apple and BE Semiconductor positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Apple 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.

The idea behind Apple Inc and BE Semiconductor Industries pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.