Correlation Between BE Semiconductor and National Beverage

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

By analyzing existing cross correlation between BE Semiconductor Industries and National Beverage Corp, you can compare the effects of market volatilities on BE Semiconductor and National Beverage 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 BE Semiconductor with a short position of National Beverage. Check out your portfolio center. Please also check ongoing floating volatility patterns of BE Semiconductor and National Beverage.

Diversification Opportunities for BE Semiconductor and National Beverage

0.4

Correlation Coefficient

BE Semiconductor  National Beverage

Very weak diversification

The 3 months correlation between BSI and National is 0.4. Overlapping area represents the amount of risk that can be diversified away by holding BE Semiconductor Industries and National Beverage Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on National Beverage Corp and BE Semiconductor 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 BE Semiconductor Industries are associated (or correlated) with National Beverage. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of National Beverage Corp has no effect on the direction of BE Semiconductor i.e., BE Semiconductor and National Beverage go up and down completely randomly.

Pair Corralation between BE Semiconductor and National Beverage

Assuming the 90 days trading horizon BE Semiconductor Industries is expected to generate 0.91 times more return on investment than National Beverage. However, BE Semiconductor Industries is 1.1 times less risky than National Beverage. It trades about 0.39 of its potential returns per unit of risk. National Beverage Corp is currently generating about -0.03 per unit of risk. If you would invest  11,060  in BE Semiconductor Industries on September 18, 2024 and sell it today you would earn a total of  1,660  from holding BE Semiconductor Industries or generate 15.01% return on investment over 90 days.

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

BE Semiconductor Industries  vs.  National Beverage Corp

BE Semiconductor Ind

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in BE Semiconductor Industries are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, BE Semiconductor unveiled solid returns over the last few months and may actually be approaching a breakup point.

National Beverage Corp

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in National Beverage Corp are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, National Beverage may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with BE Semiconductor and National Beverage

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

The idea behind BE Semiconductor Industries and National Beverage Corp 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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.