Correlation Between Benchmark Electronics and PF Bakkafrost

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

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

Diversification Opportunities for Benchmark Electronics and PF Bakkafrost

0.6

Correlation Coefficient

Benchmark Electronics  PF Bakkafrost

Poor diversification

The 3 months correlation between Benchmark and 6BF is 0.6. Overlapping area represents the amount of risk that can be diversified away by holding Benchmark Electronics and PF Bakkafrost in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PF Bakkafrost and Benchmark Electronics 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 Benchmark Electronics are associated (or correlated) with PF Bakkafrost. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of PF Bakkafrost has no effect on the direction of Benchmark Electronics i.e., Benchmark Electronics and PF Bakkafrost go up and down completely randomly.

Pair Corralation between Benchmark Electronics and PF Bakkafrost

Assuming the 90 days horizon Benchmark Electronics is expected to under-perform the PF Bakkafrost. But the stock apears to be less risky and, when comparing its historical volatility, Benchmark Electronics is 1.27 times less risky than PF Bakkafrost. The stock trades about -0.18 of its potential returns per unit of risk. The PF Bakkafrost is currently generating about -0.1 of returns per unit of risk over similar time horizon. If you would invest  5,680  in PF Bakkafrost on September 24, 2024 and sell it today you would lose (230.00) from holding PF Bakkafrost or give up 4.05% of portfolio value over 90 days.

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

Benchmark Electronics  vs.  PF Bakkafrost

Benchmark Electronics

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Benchmark Electronics are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Benchmark Electronics reported solid returns over the last few months and may actually be approaching a breakup point.

PF Bakkafrost

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in PF Bakkafrost are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain basic indicators, PF Bakkafrost may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Benchmark Electronics and PF Bakkafrost

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

The idea behind Benchmark Electronics and PF Bakkafrost 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.

Check out your portfolio center.

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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.