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

0.75

Correlation Coefficient

ASM International  Tokyo Electron

Poor diversification

The 3 months correlation between ASM and Tokyo is 0.75. 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 is expected to generate 2.42 times less return on investment than Tokyo Electron. But when comparing it to its historical volatility, ASM International NV is 2.68 times less risky than Tokyo Electron. It trades about 0.13 of its potential returns per unit of risk. Tokyo Electron is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest  14,549  in Tokyo Electron on September 17, 2024 and sell it today you would earn a total of  1,101  from holding Tokyo Electron or generate 7.57% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	95.24%
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. Despite latest fragile performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Tokyo Electron

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Tokyo Electron are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. 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.

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 Earnings Calls module to check upcoming earnings announcements updated hourly across public exchanges.