Correlation Between Holland Colours and BE Semiconductor

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

By analyzing existing cross correlation between Holland Colours NV and BE Semiconductor Industries, you can compare the effects of market volatilities on Holland Colours and BE 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 Holland Colours with a short position of BE Semiconductor. Check out your portfolio center. Please also check ongoing floating volatility patterns of Holland Colours and BE Semiconductor.

Diversification Opportunities for Holland Colours and BE Semiconductor

0.43

Correlation Coefficient

Holland Colours  BE Semiconductor

Very weak diversification

The 3 months correlation between Holland and BESI is 0.43. Overlapping area represents the amount of risk that can be diversified away by holding Holland Colours NV and BE Semiconductor Industries in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BE Semiconductor Ind and Holland Colours 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 Holland Colours NV are associated (or correlated) with BE Semiconductor. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BE Semiconductor Ind has no effect on the direction of Holland Colours i.e., Holland Colours and BE Semiconductor go up and down completely randomly.

Pair Corralation between Holland Colours and BE Semiconductor

Assuming the 90 days trading horizon Holland Colours NV is expected to generate 0.55 times more return on investment than BE Semiconductor. However, Holland Colours NV is 1.82 times less risky than BE Semiconductor. It trades about -0.01 of its potential returns per unit of risk. BE Semiconductor Industries is currently generating about -0.04 per unit of risk. If you would invest  9,050  in Holland Colours NV on December 3, 2024 and sell it today you would lose (150.00) from holding Holland Colours NV or give up 1.66% of portfolio value over 90 days.

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

Holland Colours NV  vs.  BE Semiconductor Industries

Holland Colours NV

Risk-Adjusted Performance

Very Weak

Over the last 90 days Holland Colours NV has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Holland Colours is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

BE Semiconductor Ind

Risk-Adjusted Performance

Very Weak

Over the last 90 days BE Semiconductor Industries has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, BE Semiconductor is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Holland Colours and BE Semiconductor

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

The idea behind Holland Colours NV and BE Semiconductor Industries 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.

Check out your portfolio center.

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 Center module to all portfolio management and optimization tools to improve performance of your portfolios.