Correlation Between BE Semiconductor and Banpu PCL

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

Diversification Opportunities for BE Semiconductor and Banpu PCL

-0.44

Correlation Coefficient

BE Semiconductor  Banpu PCL

Very good diversification

The 3 months correlation between BSI and Banpu is -0.44. Overlapping area represents the amount of risk that can be diversified away by holding BE Semiconductor Industries and Banpu PCL in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Banpu PCL 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 Banpu PCL. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Banpu PCL has no effect on the direction of BE Semiconductor i.e., BE Semiconductor and Banpu PCL go up and down completely randomly.

Pair Corralation between BE Semiconductor and Banpu PCL

Assuming the 90 days trading horizon BE Semiconductor Industries is expected to generate 0.46 times more return on investment than Banpu PCL. However, BE Semiconductor Industries is 2.19 times less risky than Banpu PCL. It trades about 0.19 of its potential returns per unit of risk. Banpu PCL is currently generating about -0.01 per unit of risk. If you would invest  10,500  in BE Semiconductor Industries on October 26, 2024 and sell it today you would earn a total of  3,315  from holding BE Semiconductor Industries or generate 31.57% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	98.33%
Values	Daily Returns

BE Semiconductor Industries  vs.  Banpu PCL

BE Semiconductor Ind

Risk-Adjusted Performance

14 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in BE Semiconductor Industries are ranked lower than 14 (%) 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.

Banpu PCL

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Banpu PCL has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Banpu PCL is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with BE Semiconductor and Banpu PCL

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

The idea behind BE Semiconductor Industries and Banpu PCL 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 Portfolio Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.