Correlation Between Bel Fuse and Small Capitalization

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

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

Diversification Opportunities for Bel Fuse and Small Capitalization

-0.18

Correlation Coefficient

Bel Fuse  Small Capitalization

Good diversification

The 3 months correlation between Bel and Small is -0.18. Overlapping area represents the amount of risk that can be diversified away by holding Bel Fuse A and Small Capitalization Portfolio in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Small Capitalization and Bel Fuse 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 Bel Fuse A are associated (or correlated) with Small Capitalization. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Small Capitalization has no effect on the direction of Bel Fuse i.e., Bel Fuse and Small Capitalization go up and down completely randomly.

Pair Corralation between Bel Fuse and Small Capitalization

Assuming the 90 days horizon Bel Fuse A is expected to generate 0.79 times more return on investment than Small Capitalization. However, Bel Fuse A is 1.26 times less risky than Small Capitalization. It trades about -0.02 of its potential returns per unit of risk. Small Capitalization Portfolio is currently generating about -0.17 per unit of risk. If you would invest  7,144  in Bel Fuse A on January 26, 2024 and sell it today you would lose (37.00) from holding Bel Fuse A or give up 0.52% of portfolio value over 90 days.

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

Bel Fuse A  vs.  Small Capitalization Portfolio

Bel Fuse A

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Bel Fuse A are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite somewhat conflicting technical and fundamental indicators, Bel Fuse may actually be approaching a critical reversion point that can send shares even higher in May 2024.

Small Capitalization

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Small Capitalization Portfolio are ranked lower than 4 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Small Capitalization is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Bel Fuse and Small Capitalization

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

The idea behind Bel Fuse A and Small Capitalization Portfolio 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 File Import module to quickly import all of your third-party portfolios from your local drive in csv format.