Correlation Between BE Semiconductor and Rayonier

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

Diversification Opportunities for BE Semiconductor and Rayonier

-0.59

Correlation Coefficient

BE Semiconductor  Rayonier

Excellent diversification

The 3 months correlation between BSI and Rayonier is -0.59. Overlapping area represents the amount of risk that can be diversified away by holding BE Semiconductor Industries and Rayonier in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Rayonier 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 Rayonier. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Rayonier has no effect on the direction of BE Semiconductor i.e., BE Semiconductor and Rayonier go up and down completely randomly.

Pair Corralation between BE Semiconductor and Rayonier

Assuming the 90 days trading horizon BE Semiconductor Industries is expected to generate 2.29 times more return on investment than Rayonier. However, BE Semiconductor is 2.29 times more volatile than Rayonier. It trades about 0.33 of its potential returns per unit of risk. Rayonier is currently generating about -0.32 per unit of risk. If you would invest  12,515  in BE Semiconductor Industries on October 11, 2024 and sell it today you would earn a total of  2,015  from holding BE Semiconductor Industries or generate 16.1% return on investment over 90 days.

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

BE Semiconductor Industries  vs.  Rayonier

BE Semiconductor Ind

Risk-Adjusted Performance

14 of 100

Good

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 fragile basic indicators, BE Semiconductor unveiled solid returns over the last few months and may actually be approaching a breakup point.

Rayonier

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Rayonier has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Rayonier 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 Rayonier

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

The idea behind BE Semiconductor Industries and Rayonier 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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.