Correlation Between BII Railway and Elmos Semiconductor

Can any of the company-specific risk be diversified away by investing in both BII Railway and Elmos Semiconductor 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 BII Railway and Elmos Semiconductor into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between BII Railway Transportation and Elmos Semiconductor SE, you can compare the effects of market volatilities on BII Railway and Elmos Semiconductor 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 BII Railway with a short position of Elmos Semiconductor. Check out your portfolio center. Please also check ongoing floating volatility patterns of BII Railway and Elmos Semiconductor.

Diversification Opportunities for BII Railway and Elmos Semiconductor

0.22

Correlation Coefficient

BII Railway  Elmos Semiconductor

Modest diversification

The 3 months correlation between BII and Elmos is 0.22. Overlapping area represents the amount of risk that can be diversified away by holding BII Railway Transportation and Elmos Semiconductor SE in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Elmos Semiconductor and BII Railway 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 BII Railway Transportation are associated (or correlated) with Elmos Semiconductor. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Elmos Semiconductor has no effect on the direction of BII Railway i.e., BII Railway and Elmos Semiconductor go up and down completely randomly.

Pair Corralation between BII Railway and Elmos Semiconductor

Assuming the 90 days horizon BII Railway is expected to generate 2.06 times less return on investment than Elmos Semiconductor. But when comparing it to its historical volatility, BII Railway Transportation is 1.98 times less risky than Elmos Semiconductor. It trades about 0.27 of its potential returns per unit of risk. Elmos Semiconductor SE is currently generating about 0.28 of returns per unit of risk over similar time horizon. If you would invest  6,630  in Elmos Semiconductor SE on October 11, 2024 and sell it today you would earn a total of  1,060  from holding Elmos Semiconductor SE or generate 15.99% return on investment over 90 days.

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

BII Railway Transportation  vs.  Elmos Semiconductor SE

BII Railway Transpor

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days BII Railway Transportation has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest uncertain 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.

Elmos Semiconductor

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Elmos Semiconductor SE are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively fragile technical and fundamental indicators, Elmos Semiconductor unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with BII Railway and Elmos Semiconductor

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

The idea behind BII Railway Transportation and Elmos Semiconductor SE 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 Companies Directory module to evaluate performance of over 100,000 Stocks, Funds, and ETFs against different fundamentals.