Correlation Between BE Semiconductor and ELLINGTON RESIDMTG

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

Diversification Opportunities for BE Semiconductor and ELLINGTON RESIDMTG

0.71

Correlation Coefficient

BE Semiconductor  ELLINGTON RESIDMTG

Poor diversification

The 3 months correlation between BSI and ELLINGTON is 0.71. Overlapping area represents the amount of risk that can be diversified away by holding BE Semiconductor Industries and ELLINGTON RESIDMTG SBI in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ELLINGTON RESIDMTG SBI 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 ELLINGTON RESIDMTG. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ELLINGTON RESIDMTG SBI has no effect on the direction of BE Semiconductor i.e., BE Semiconductor and ELLINGTON RESIDMTG go up and down completely randomly.

Pair Corralation between BE Semiconductor and ELLINGTON RESIDMTG

Assuming the 90 days trading horizon BE Semiconductor Industries is expected to generate 1.45 times more return on investment than ELLINGTON RESIDMTG. However, BE Semiconductor is 1.45 times more volatile than ELLINGTON RESIDMTG SBI. It trades about 0.5 of its potential returns per unit of risk. ELLINGTON RESIDMTG SBI is currently generating about 0.02 per unit of risk. If you would invest  12,355  in BE Semiconductor Industries on October 10, 2024 and sell it today you would earn a total of  2,780  from holding BE Semiconductor Industries or generate 22.5% return on investment over 90 days.

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

BE Semiconductor Industries  vs.  ELLINGTON RESIDMTG SBI

BE Semiconductor Ind

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in BE Semiconductor Industries are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively fragile basic indicators, BE Semiconductor unveiled solid returns over the last few months and may actually be approaching a breakup point.

ELLINGTON RESIDMTG SBI

Risk-Adjusted Performance

8 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in ELLINGTON RESIDMTG SBI are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, ELLINGTON RESIDMTG may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with BE Semiconductor and ELLINGTON RESIDMTG

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

The idea behind BE Semiconductor Industries and ELLINGTON RESIDMTG SBI 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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.