Correlation Between HP and BE Semiconductor

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

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

Diversification Opportunities for HP and BE Semiconductor

-0.48

Correlation Coefficient

HP  BE Semiconductor

Very good diversification

The 3 months correlation between HP and BESIY is -0.48. Overlapping area represents the amount of risk that can be diversified away by holding HP Inc 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 HP 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 HP Inc 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 HP i.e., HP and BE Semiconductor go up and down completely randomly.

Pair Corralation between HP and BE Semiconductor

Considering the 90-day investment horizon HP Inc is expected to under-perform the BE Semiconductor. In addition to that, HP is 1.41 times more volatile than BE Semiconductor Industries. It trades about -0.12 of its total potential returns per unit of risk. BE Semiconductor Industries is currently generating about 0.33 per unit of volatility. If you would invest  11,689  in BE Semiconductor Industries on September 18, 2024 and sell it today you would earn a total of  1,725  from holding BE Semiconductor Industries or generate 14.76% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	95.24%
Values	Daily Returns

HP Inc  vs.  BE Semiconductor Industries

HP Inc

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days HP Inc has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable basic indicators, HP is not utilizing all of its potentials. The recent stock price agitation, may contribute to short-term losses for the retail investors.

BE Semiconductor Ind

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in BE Semiconductor Industries are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of fairly unsteady forward indicators, BE Semiconductor may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with HP and BE Semiconductor

The main advantage of trading using opposite HP and BE Semiconductor positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if HP 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 HP Inc 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.

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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 Transaction History module to view history of all your transactions and understand their impact on performance.