Correlation Between Bel Fuse and PAR Technology

Can any of the company-specific risk be diversified away by investing in both Bel Fuse and PAR Technology 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 PAR Technology 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 PAR Technology, you can compare the effects of market volatilities on Bel Fuse and PAR Technology 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 PAR Technology. Check out your portfolio center. Please also check ongoing floating volatility patterns of Bel Fuse and PAR Technology.

Diversification Opportunities for Bel Fuse and PAR Technology

-0.53

Correlation Coefficient

Bel Fuse  PAR Technology

Excellent diversification

The 3 months correlation between Bel and PAR is -0.53. Overlapping area represents the amount of risk that can be diversified away by holding Bel Fuse A and PAR Technology in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PAR Technology 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 PAR Technology. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of PAR Technology has no effect on the direction of Bel Fuse i.e., Bel Fuse and PAR Technology go up and down completely randomly.

Pair Corralation between Bel Fuse and PAR Technology

Assuming the 90 days horizon Bel Fuse A is expected to under-perform the PAR Technology. But the stock apears to be less risky and, when comparing its historical volatility, Bel Fuse A is 1.21 times less risky than PAR Technology. The stock trades about -0.08 of its potential returns per unit of risk. The PAR Technology is currently generating about 0.22 of returns per unit of risk over similar time horizon. If you would invest  5,267  in PAR Technology on October 7, 2024 and sell it today you would earn a total of  2,141  from holding PAR Technology or generate 40.65% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

Bel Fuse A  vs.  PAR Technology

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 latest conflicting performance, the Stock's technical and fundamental indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

PAR Technology

Risk-Adjusted Performance

17 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in PAR Technology are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. Even with relatively abnormal basic indicators, PAR Technology reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Bel Fuse and PAR Technology

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

The idea behind Bel Fuse A and PAR Technology 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 Portfolio Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.