Correlation Between Advantest and Disco Corp

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

By analyzing existing cross correlation between Advantest and Disco Corp ADR, you can compare the effects of market volatilities on Advantest and Disco Corp 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 Disco Corp. Check out your portfolio center. Please also check ongoing floating volatility patterns of Advantest and Disco Corp.

Diversification Opportunities for Advantest and Disco Corp

0.67

Correlation Coefficient

Advantest  Disco Corp

Poor diversification

The 3 months correlation between Advantest and Disco is 0.67. Overlapping area represents the amount of risk that can be diversified away by holding Advantest and Disco Corp ADR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Disco Corp ADR 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 Disco Corp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Disco Corp ADR has no effect on the direction of Advantest i.e., Advantest and Disco Corp go up and down completely randomly.

Pair Corralation between Advantest and Disco Corp

Assuming the 90 days horizon Advantest is expected to generate 0.85 times more return on investment than Disco Corp. However, Advantest is 1.18 times less risky than Disco Corp. It trades about 0.21 of its potential returns per unit of risk. Disco Corp ADR is currently generating about 0.06 per unit of risk. If you would invest  4,347  in Advantest on September 17, 2024 and sell it today you would earn a total of  1,903  from holding Advantest or generate 43.78% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	98.44%
Values	Daily Returns

Advantest  vs.  Disco Corp ADR

Advantest

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Advantest are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Advantest reported solid returns over the last few months and may actually be approaching a breakup point.

Disco Corp ADR

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Disco Corp ADR are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of fairly fragile basic indicators, Disco Corp showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Advantest and Disco Corp

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

The idea behind Advantest and Disco Corp ADR 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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.