Correlation Between BE Semiconductor and Wenzhou Kangning

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

Diversification Opportunities for BE Semiconductor and Wenzhou Kangning

0.05

Correlation Coefficient

BE Semiconductor  Wenzhou Kangning

Significant diversification

The 3 months correlation between BSI and Wenzhou is 0.05. Overlapping area represents the amount of risk that can be diversified away by holding BE Semiconductor Industries and Wenzhou Kangning Hospital in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Wenzhou Kangning Hospital 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 Wenzhou Kangning. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Wenzhou Kangning Hospital has no effect on the direction of BE Semiconductor i.e., BE Semiconductor and Wenzhou Kangning go up and down completely randomly.

Pair Corralation between BE Semiconductor and Wenzhou Kangning

Assuming the 90 days trading horizon BE Semiconductor Industries is expected to generate 1.38 times more return on investment than Wenzhou Kangning. However, BE Semiconductor is 1.38 times more volatile than Wenzhou Kangning Hospital. It trades about 0.32 of its potential returns per unit of risk. Wenzhou Kangning Hospital is currently generating about -0.25 per unit of risk. If you would invest  12,355  in BE Semiconductor Industries on October 8, 2024 and sell it today you would earn a total of  1,165  from holding BE Semiconductor Industries or generate 9.43% return on investment over 90 days.

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

BE Semiconductor Industries  vs.  Wenzhou Kangning Hospital

BE Semiconductor Ind

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in BE Semiconductor Industries are ranked lower than 11 (%) 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.

Wenzhou Kangning Hospital

Risk-Adjusted Performance

5 of 100

Modest

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

Pair Trading with BE Semiconductor and Wenzhou Kangning

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

The idea behind BE Semiconductor Industries and Wenzhou Kangning Hospital 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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.