Correlation Between Bel Fuse and EMCORE

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

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

Diversification Opportunities for Bel Fuse and EMCORE

-0.6

Correlation Coefficient

Bel Fuse  EMCORE

Excellent diversification

The 3 months correlation between Bel and EMCORE is -0.6. Overlapping area represents the amount of risk that can be diversified away by holding Bel Fuse A and EMCORE in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on EMCORE and Bel Fuse 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 Bel Fuse A are associated (or correlated) with EMCORE. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of EMCORE has no effect on the direction of Bel Fuse i.e., Bel Fuse and EMCORE go up and down completely randomly.

Pair Corralation between Bel Fuse and EMCORE

Assuming the 90 days horizon Bel Fuse A is expected to generate 0.42 times more return on investment than EMCORE. However, Bel Fuse A is 2.4 times less risky than EMCORE. It trades about 0.07 of its potential returns per unit of risk. EMCORE is currently generating about 0.0 per unit of risk. If you would invest  4,004  in Bel Fuse A on October 22, 2024 and sell it today you would earn a total of  4,935  from holding Bel Fuse A or generate 123.25% return on investment over 90 days.

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

Bel Fuse A  vs.  EMCORE

Bel Fuse A

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Bel Fuse A has generated negative risk-adjusted returns adding no value to investors with long positions. Despite conflicting performance in the last few months, the Stock's technical and fundamental indicators remain somewhat strong which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

EMCORE

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in EMCORE are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Even with relatively abnormal forward-looking signals, EMCORE reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Bel Fuse and EMCORE

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

The idea behind Bel Fuse A and EMCORE 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.