Correlation Between BE Semiconductor and RTL Group

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

Diversification Opportunities for BE Semiconductor and RTL Group

0.13

Correlation Coefficient

BE Semiconductor  RTL Group

Average diversification

The 3 months correlation between BSI and RTL is 0.13. Overlapping area represents the amount of risk that can be diversified away by holding BE Semiconductor Industries and RTL Group SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on RTL Group SA 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 RTL Group. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of RTL Group SA has no effect on the direction of BE Semiconductor i.e., BE Semiconductor and RTL Group go up and down completely randomly.

Pair Corralation between BE Semiconductor and RTL Group

Assuming the 90 days trading horizon BE Semiconductor Industries is expected to generate 2.65 times more return on investment than RTL Group. However, BE Semiconductor is 2.65 times more volatile than RTL Group SA. It trades about 0.3 of its potential returns per unit of risk. RTL Group SA is currently generating about 0.18 per unit of risk. If you would invest  12,655  in BE Semiconductor Industries on October 20, 2024 and sell it today you would earn a total of  2,200  from holding BE Semiconductor Industries or generate 17.38% 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.  RTL Group SA

BE Semiconductor Ind

Risk-Adjusted Performance

19 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in BE Semiconductor Industries are ranked lower than 19 (%) 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.

RTL Group SA

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days RTL Group SA has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest fragile performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Pair Trading with BE Semiconductor and RTL Group

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

The idea behind BE Semiconductor Industries and RTL Group SA 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 Global Markets Map module to get a quick overview of global market snapshot using zoomable world map. Drill down to check world indexes.