Correlation Between Berkeley Energy and Tokyo Electron

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

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

Diversification Opportunities for Berkeley Energy and Tokyo Electron

-0.42

Correlation Coefficient

Berkeley Energy  Tokyo Electron

Very good diversification

The 3 months correlation between Berkeley and Tokyo is -0.42. Overlapping area represents the amount of risk that can be diversified away by holding Berkeley Energy and Tokyo Electron Ltd in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Tokyo Electron and Berkeley Energy 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 Berkeley Energy 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 Berkeley Energy i.e., Berkeley Energy and Tokyo Electron go up and down completely randomly.

Pair Corralation between Berkeley Energy and Tokyo Electron

Assuming the 90 days horizon Berkeley Energy is expected to generate 2.33 times more return on investment than Tokyo Electron. However, Berkeley Energy is 2.33 times more volatile than Tokyo Electron Ltd. It trades about 0.14 of its potential returns per unit of risk. Tokyo Electron Ltd is currently generating about -0.02 per unit of risk. If you would invest  23.00  in Berkeley Energy on December 28, 2024 and sell it today you would earn a total of  11.00  from holding Berkeley Energy or generate 47.83% return on investment over 90 days.

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

Berkeley Energy  vs.  Tokyo Electron Ltd

Berkeley Energy

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Berkeley Energy are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak basic indicators, Berkeley Energy reported solid returns over the last few months and may actually be approaching a breakup point.

Tokyo Electron

Risk-Adjusted Performance

Very Weak

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

Pair Trading with Berkeley Energy and Tokyo Electron

The main advantage of trading using opposite Berkeley Energy and Tokyo Electron positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Berkeley Energy 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 Berkeley Energy and Tokyo Electron Ltd 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 Companies Directory module to evaluate performance of over 100,000 Stocks, Funds, and ETFs against different fundamentals.