Correlation Between Advantest and Sumco Corp

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

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

Diversification Opportunities for Advantest and Sumco Corp

-0.91

Correlation Coefficient

Advantest  Sumco Corp

Pay attention - limited upside

The 3 months correlation between Advantest and Sumco is -0.91. Overlapping area represents the amount of risk that can be diversified away by holding Advantest and Sumco Corp ADR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sumco 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 Sumco Corp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sumco Corp ADR has no effect on the direction of Advantest i.e., Advantest and Sumco Corp go up and down completely randomly.

Pair Corralation between Advantest and Sumco Corp

Assuming the 90 days horizon Advantest is expected to generate 24.59 times more return on investment than Sumco Corp. However, Advantest is 24.59 times more volatile than Sumco Corp ADR. It trades about 0.15 of its potential returns per unit of risk. Sumco Corp ADR is currently generating about -0.03 per unit of risk. If you would invest  6,551  in Advantest on September 18, 2024 and sell it today you would lose (301.00) from holding Advantest or give up 4.59% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Significant
Accuracy	74.75%
Values	Daily Returns

Advantest  vs.  Sumco 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.

Sumco Corp ADR

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Sumco Corp ADR has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fragile performance in the last few months, the Stock's basic indicators remain fairly strong which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with Advantest and Sumco Corp

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

The idea behind Advantest and Sumco 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 ETF Categories module to list of ETF categories grouped based on various criteria, such as the investment strategy or type of investments.