Correlation Between Aterian and Tokyo Electron

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

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

Diversification Opportunities for Aterian and Tokyo Electron

0.36

Correlation Coefficient

Aterian  Tokyo Electron

Weak diversification

The 3 months correlation between Aterian and Tokyo is 0.36. Overlapping area represents the amount of risk that can be diversified away by holding Aterian and Tokyo Electron in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Tokyo Electron and Aterian 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 Aterian 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 Aterian i.e., Aterian and Tokyo Electron go up and down completely randomly.

Pair Corralation between Aterian and Tokyo Electron

Given the investment horizon of 90 days Aterian is expected to under-perform the Tokyo Electron. But the stock apears to be less risky and, when comparing its historical volatility, Aterian is 1.24 times less risky than Tokyo Electron. The stock trades about -0.17 of its potential returns per unit of risk. The Tokyo Electron is currently generating about -0.01 of returns per unit of risk over similar time horizon. If you would invest  16,180  in Tokyo Electron on September 18, 2024 and sell it today you would lose (886.00) from holding Tokyo Electron or give up 5.48% of portfolio value over 90 days.

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

Aterian  vs.  Tokyo Electron

Aterian

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Aterian has generated negative risk-adjusted returns adding no value to investors with long positions. Even with fragile performance in the last few months, the Stock's technical and fundamental indicators remain relatively invariable which may send shares a bit higher in January 2025. The latest agitation may also be a sign of long-running up-swing for the enterprise retail 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 Aterian and Tokyo Electron

The main advantage of trading using opposite Aterian and Tokyo Electron positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Aterian 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 Aterian 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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.