Correlation Between Marine Products and Tokyo Electron

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

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

Diversification Opportunities for Marine Products and Tokyo Electron

-0.07

Correlation Coefficient

Marine Products  Tokyo Electron

Good diversification

The 3 months correlation between Marine and Tokyo is -0.07. Overlapping area represents the amount of risk that can be diversified away by holding Marine Products and Tokyo Electron in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Tokyo Electron and Marine Products 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 Marine Products 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 Marine Products i.e., Marine Products and Tokyo Electron go up and down completely randomly.

Pair Corralation between Marine Products and Tokyo Electron

Considering the 90-day investment horizon Marine Products is expected to under-perform the Tokyo Electron. But the stock apears to be less risky and, when comparing its historical volatility, Marine Products is 1.18 times less risky than Tokyo Electron. The stock trades about -0.01 of its potential returns per unit of risk. The Tokyo Electron is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest  11,282  in Tokyo Electron on October 6, 2024 and sell it today you would earn a total of  3,459  from holding Tokyo Electron or generate 30.66% return on investment over 90 days.

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

Marine Products  vs.  Tokyo Electron

Marine Products

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Marine Products has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong basic indicators, Marine Products is not utilizing all of its potentials. The recent 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 fragile performance in the last few months, the Stock's essential indicators remain nearly stable which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with Marine Products and Tokyo Electron

The main advantage of trading using opposite Marine Products and Tokyo Electron positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Marine Products 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 Marine Products 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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.