Correlation Between Bel Fuse and Flex

Can any of the company-specific risk be diversified away by investing in both Bel Fuse and Flex 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 Flex 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 Flex, you can compare the effects of market volatilities on Bel Fuse and Flex 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 Flex. Check out your portfolio center. Please also check ongoing floating volatility patterns of Bel Fuse and Flex.

Diversification Opportunities for Bel Fuse and Flex

0.82

Correlation Coefficient

Bel Fuse  Flex

Very poor diversification

The 3 months correlation between Bel and Flex is 0.82. Overlapping area represents the amount of risk that can be diversified away by holding Bel Fuse A and Flex in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Flex 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 Flex. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Flex has no effect on the direction of Bel Fuse i.e., Bel Fuse and Flex go up and down completely randomly.

Pair Corralation between Bel Fuse and Flex

Assuming the 90 days horizon Bel Fuse A is expected to generate 1.14 times more return on investment than Flex. However, Bel Fuse is 1.14 times more volatile than Flex. It trades about 0.14 of its potential returns per unit of risk. Flex is currently generating about 0.12 per unit of risk. If you would invest  4,630  in Bel Fuse A on July 22, 2024 and sell it today you would earn a total of  5,857  from holding Bel Fuse A or generate 126.5% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	99.6%
Values	Daily Returns

Bel Fuse A  vs.  Flex

Bel Fuse A

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Bel Fuse A are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite somewhat conflicting technical and fundamental indicators, Bel Fuse sustained solid returns over the last few months and may actually be approaching a breakup point.

Flex

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Flex are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of fairly inconsistent technical and fundamental indicators, Flex showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Bel Fuse and Flex

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

The idea behind Bel Fuse A and Flex 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 Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.