Correlation Between Bel Fuse and LSI Industries

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

By analyzing existing cross correlation between Bel Fuse B and LSI Industries, you can compare the effects of market volatilities on Bel Fuse and LSI Industries 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 LSI Industries. Check out your portfolio center. Please also check ongoing floating volatility patterns of Bel Fuse and LSI Industries.

Diversification Opportunities for Bel Fuse and LSI Industries

0.01

Correlation Coefficient

Bel Fuse  LSI Industries

Significant diversification

The 3 months correlation between Bel and LSI is 0.01. Overlapping area represents the amount of risk that can be diversified away by holding Bel Fuse B and LSI Industries in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on LSI Industries 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 B are associated (or correlated) with LSI Industries. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of LSI Industries has no effect on the direction of Bel Fuse i.e., Bel Fuse and LSI Industries go up and down completely randomly.

Pair Corralation between Bel Fuse and LSI Industries

Assuming the 90 days horizon Bel Fuse B is expected to generate 1.08 times more return on investment than LSI Industries. However, Bel Fuse is 1.08 times more volatile than LSI Industries. It trades about 0.02 of its potential returns per unit of risk. LSI Industries is currently generating about -0.38 per unit of risk. If you would invest  8,300  in Bel Fuse B on November 29, 2024 and sell it today you would earn a total of  34.00  from holding Bel Fuse B or generate 0.41% return on investment over 90 days.

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

Bel Fuse B  vs.  LSI Industries

Bel Fuse B

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Bel Fuse B are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong technical and fundamental indicators, Bel Fuse is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

LSI Industries

Risk-Adjusted Performance

Very Weak

Over the last 90 days LSI Industries has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, LSI Industries is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Bel Fuse and LSI Industries

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

The idea behind Bel Fuse B and LSI 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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.