Correlation Between ASM International and Tokyo Electron

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

Diversification Opportunities for ASM International and Tokyo Electron

0.3

Correlation Coefficient

ASM International  Tokyo Electron

Weak diversification

The 3 months correlation between ASM and Tokyo is 0.3. Overlapping area represents the amount of risk that can be diversified away by holding ASM International NV and Tokyo Electron in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Tokyo Electron 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 Tokyo Electron. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Tokyo Electron has no effect on the direction of ASM International i.e., ASM International and Tokyo Electron go up and down completely randomly.

Pair Corralation between ASM International and Tokyo Electron

Assuming the 90 days horizon ASM International NV is expected to generate 0.85 times more return on investment than Tokyo Electron. However, ASM International NV is 1.18 times less risky than Tokyo Electron. It trades about 0.47 of its potential returns per unit of risk. Tokyo Electron is currently generating about 0.05 per unit of risk. If you would invest  24,746  in ASM International NV on September 18, 2024 and sell it today you would earn a total of  10,256  from holding ASM International NV or generate 41.45% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	6.06%
Values	Daily Returns

ASM International NV  vs.  Tokyo Electron

ASM International

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days ASM International NV has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong forward indicators, ASM International is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Tokyo Electron

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Tokyo Electron has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable essential indicators, Tokyo Electron is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with ASM International and Tokyo Electron

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

The idea behind ASM International NV and Tokyo Electron 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.