Correlation Between Belden and Erf Wireless

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

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

Diversification Opportunities for Belden and Erf Wireless

-0.17

Correlation Coefficient

Belden  Erf Wireless

Good diversification

The 3 months correlation between Belden and Erf is -0.17. Overlapping area represents the amount of risk that can be diversified away by holding Belden Inc and Erf Wireless in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Erf Wireless and Belden 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 Belden Inc are associated (or correlated) with Erf Wireless. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Erf Wireless has no effect on the direction of Belden i.e., Belden and Erf Wireless go up and down completely randomly.

Pair Corralation between Belden and Erf Wireless

Considering the 90-day investment horizon Belden is expected to generate 31.47 times less return on investment than Erf Wireless. But when comparing it to its historical volatility, Belden Inc is 27.29 times less risky than Erf Wireless. It trades about 0.05 of its potential returns per unit of risk. Erf Wireless is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  0.01  in Erf Wireless on October 11, 2024 and sell it today you would lose  0.00  from holding Erf Wireless or give up 0.0% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	99.6%
Values	Daily Returns

Belden Inc  vs.  Erf Wireless

Belden Inc

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Belden Inc has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound fundamental indicators, Belden is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Erf Wireless

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Erf Wireless are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite somewhat unfluctuating technical and fundamental indicators, Erf Wireless sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Belden and Erf Wireless

The main advantage of trading using opposite Belden and Erf Wireless positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Belden position performs unexpectedly, Erf Wireless 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 Erf Wireless will offset losses from the drop in Erf Wireless' long position.

The idea behind Belden Inc and Erf Wireless 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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.