Correlation Between Sumco Corp and AIXTRON SE

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

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

Diversification Opportunities for Sumco Corp and AIXTRON SE

-0.17

Correlation Coefficient

Sumco Corp  AIXTRON SE

Good diversification

The 3 months correlation between Sumco and AIXTRON is -0.17. Overlapping area represents the amount of risk that can be diversified away by holding Sumco Corp ADR and AIXTRON SE in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AIXTRON SE and Sumco Corp 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 Sumco Corp ADR are associated (or correlated) with AIXTRON SE. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of AIXTRON SE has no effect on the direction of Sumco Corp i.e., Sumco Corp and AIXTRON SE go up and down completely randomly.

Pair Corralation between Sumco Corp and AIXTRON SE

Assuming the 90 days horizon Sumco Corp ADR is expected to generate 0.74 times more return on investment than AIXTRON SE. However, Sumco Corp ADR is 1.35 times less risky than AIXTRON SE. It trades about -0.02 of its potential returns per unit of risk. AIXTRON SE is currently generating about -0.06 per unit of risk. If you would invest  1,602  in Sumco Corp ADR on December 5, 2024 and sell it today you would lose (113.00) from holding Sumco Corp ADR or give up 7.05% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	93.22%
Values	Daily Returns

Sumco Corp ADR  vs.  AIXTRON SE

Sumco Corp ADR

Risk-Adjusted Performance

Very Weak

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

AIXTRON SE

Risk-Adjusted Performance

Very Weak

Over the last 90 days AIXTRON SE has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with Sumco Corp and AIXTRON SE

The main advantage of trading using opposite Sumco Corp and AIXTRON SE positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Sumco Corp position performs unexpectedly, AIXTRON SE 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 AIXTRON SE will offset losses from the drop in AIXTRON SE's long position.

The idea behind Sumco Corp ADR and AIXTRON SE 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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.