Correlation Between US Global and Tokyo Electron

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

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

Diversification Opportunities for US Global and Tokyo Electron

-0.04

Correlation Coefficient

US Global  Tokyo Electron

Good diversification

The 3 months correlation between GROW and Tokyo is -0.04. Overlapping area represents the amount of risk that can be diversified away by holding US Global Investors and Tokyo Electron in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Tokyo Electron and US Global 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 US Global Investors 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 US Global i.e., US Global and Tokyo Electron go up and down completely randomly.

Pair Corralation between US Global and Tokyo Electron

Given the investment horizon of 90 days US Global is expected to generate 42.91 times less return on investment than Tokyo Electron. But when comparing it to its historical volatility, US Global Investors is 5.51 times less risky than Tokyo Electron. It trades about 0.04 of its potential returns per unit of risk. Tokyo Electron is currently generating about 0.29 of returns per unit of risk over similar time horizon. If you would invest  14,720  in Tokyo Electron on October 26, 2024 and sell it today you would earn a total of  2,890  from holding Tokyo Electron or generate 19.63% return on investment over 90 days.

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

US Global Investors  vs.  Tokyo Electron

US Global Investors

Risk-Adjusted Performance

1 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in US Global Investors are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of fairly stable basic indicators, US Global is not utilizing all of its potentials. The recent stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Tokyo Electron

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Tokyo Electron are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak essential indicators, Tokyo Electron reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with US Global and Tokyo Electron

The main advantage of trading using opposite US Global and Tokyo Electron positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if US Global 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 US Global Investors 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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.