Correlation Between BE Semiconductor and JAPAN AIRLINES

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

Diversification Opportunities for BE Semiconductor and JAPAN AIRLINES

0.77

Correlation Coefficient

BE Semiconductor  JAPAN AIRLINES

Poor diversification

The 3 months correlation between BSI and JAPAN is 0.77. Overlapping area represents the amount of risk that can be diversified away by holding BE Semiconductor Industries and JAPAN AIRLINES in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on JAPAN AIRLINES 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 JAPAN AIRLINES. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of JAPAN AIRLINES has no effect on the direction of BE Semiconductor i.e., BE Semiconductor and JAPAN AIRLINES go up and down completely randomly.

Pair Corralation between BE Semiconductor and JAPAN AIRLINES

Assuming the 90 days trading horizon BE Semiconductor Industries is expected to generate 2.28 times more return on investment than JAPAN AIRLINES. However, BE Semiconductor is 2.28 times more volatile than JAPAN AIRLINES. It trades about 0.07 of its potential returns per unit of risk. JAPAN AIRLINES is currently generating about -0.02 per unit of risk. If you would invest  5,269  in BE Semiconductor Industries on September 19, 2024 and sell it today you would earn a total of  7,596  from holding BE Semiconductor Industries or generate 144.16% 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.  JAPAN AIRLINES

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 may actually be approaching a critical reversion point that can send shares even higher in January 2025.

JAPAN AIRLINES

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in JAPAN AIRLINES are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound essential indicators, JAPAN AIRLINES is not utilizing all of its potentials. The newest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with BE Semiconductor and JAPAN AIRLINES

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

The idea behind BE Semiconductor Industries and JAPAN AIRLINES 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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.