Correlation Between Advantest and AIXTRON SE

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

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

Diversification Opportunities for Advantest and AIXTRON SE

0.69

Correlation Coefficient

Advantest  AIXTRON SE

Poor diversification

The 3 months correlation between Advantest and AIXTRON is 0.69. Overlapping area represents the amount of risk that can be diversified away by holding Advantest and AIXTRON SE in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AIXTRON SE and Advantest 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 Advantest are associated (or correlated) with AIXTRON SE. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of AIXTRON SE has no effect on the direction of Advantest i.e., Advantest and AIXTRON SE go up and down completely randomly.

Pair Corralation between Advantest and AIXTRON SE

Assuming the 90 days horizon Advantest is expected to under-perform the AIXTRON SE. In addition to that, Advantest is 1.03 times more volatile than AIXTRON SE. It trades about -0.09 of its total potential returns per unit of risk. AIXTRON SE is currently generating about -0.07 per unit of volatility. If you would invest  1,615  in AIXTRON SE on December 29, 2024 and sell it today you would lose (365.00) from holding AIXTRON SE or give up 22.6% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	96.72%
Values	Daily Returns

Advantest  vs.  AIXTRON SE

Advantest

Risk-Adjusted Performance

Very Weak

Over the last 90 days Advantest has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fragile performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

AIXTRON SE

Risk-Adjusted Performance

Very Weak

Over the last 90 days AIXTRON SE has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with Advantest and AIXTRON SE

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

The idea behind Advantest and AIXTRON SE 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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.