Correlation Between ASM International and Basic Fit

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

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

Diversification Opportunities for ASM International and Basic Fit

0.14

Correlation Coefficient

ASM International  Basic Fit

Average diversification

The 3 months correlation between ASM and Basic is 0.14. Overlapping area represents the amount of risk that can be diversified away by holding ASM International NV and Basic Fit NV in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Basic Fit NV and ASM International 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 ASM International NV are associated (or correlated) with Basic Fit. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Basic Fit NV has no effect on the direction of ASM International i.e., ASM International and Basic Fit go up and down completely randomly.

Pair Corralation between ASM International and Basic Fit

Assuming the 90 days trading horizon ASM International NV is expected to generate 1.38 times more return on investment than Basic Fit. However, ASM International is 1.38 times more volatile than Basic Fit NV. It trades about 0.19 of its potential returns per unit of risk. Basic Fit NV is currently generating about -0.01 per unit of risk. If you would invest  56,600  in ASM International NV on October 27, 2024 and sell it today you would earn a total of  4,300  from holding ASM International NV or generate 7.6% return on investment over 90 days.

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

ASM International NV  vs.  Basic Fit NV

ASM International

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in ASM International NV are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain primary indicators, ASM International unveiled solid returns over the last few months and may actually be approaching a breakup point.

Basic Fit NV

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Basic Fit NV has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Basic Fit is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with ASM International and Basic Fit

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

The idea behind ASM International NV and Basic Fit NV 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 Piotroski F Score module to get Piotroski F Score based on the binary analysis strategy of nine different fundamentals.