Correlation Between Super Micro and Bel Fuse

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

By analyzing existing cross correlation between Super Micro Computer and Bel Fuse A, you can compare the effects of market volatilities on Super Micro and Bel Fuse 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 Super Micro with a short position of Bel Fuse. Check out your portfolio center. Please also check ongoing floating volatility patterns of Super Micro and Bel Fuse.

Diversification Opportunities for Super Micro and Bel Fuse

-0.36

Correlation Coefficient

Super Micro  Bel Fuse

Very good diversification

The 3 months correlation between Super and Bel is -0.36. Overlapping area represents the amount of risk that can be diversified away by holding Super Micro Computer and Bel Fuse A in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bel Fuse A and Super Micro 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 Super Micro Computer are associated (or correlated) with Bel Fuse. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Bel Fuse A has no effect on the direction of Super Micro i.e., Super Micro and Bel Fuse go up and down completely randomly.

Pair Corralation between Super Micro and Bel Fuse

Given the investment horizon of 90 days Super Micro Computer is expected to generate 3.03 times more return on investment than Bel Fuse. However, Super Micro is 3.03 times more volatile than Bel Fuse A. It trades about 0.08 of its potential returns per unit of risk. Bel Fuse A is currently generating about -0.13 per unit of risk. If you would invest  3,433  in Super Micro Computer on December 24, 2024 and sell it today you would earn a total of  730.00  from holding Super Micro Computer or generate 21.26% return on investment over 90 days.

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

Super Micro Computer  vs.  Bel Fuse A

Super Micro Computer

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Super Micro Computer are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite fairly uncertain fundamental indicators, Super Micro demonstrated solid returns over the last few months and may actually be approaching a breakup point.

Bel Fuse A

Risk-Adjusted Performance

Very Weak

Over the last 90 days Bel Fuse A has generated negative risk-adjusted returns adding no value to investors with long positions. Despite conflicting performance in the last few months, the Stock's technical and fundamental indicators remain somewhat strong which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with Super Micro and Bel Fuse

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

The idea behind Super Micro Computer and Bel Fuse A 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 Portfolio Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.