Correlation Between Tokyo Electron and Spectra7 Microsystems

Can any of the company-specific risk be diversified away by investing in both Tokyo Electron and Spectra7 Microsystems 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 Tokyo Electron and Spectra7 Microsystems into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Tokyo Electron and Spectra7 Microsystems, you can compare the effects of market volatilities on Tokyo Electron and Spectra7 Microsystems 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 Tokyo Electron with a short position of Spectra7 Microsystems. Check out your portfolio center. Please also check ongoing floating volatility patterns of Tokyo Electron and Spectra7 Microsystems.

Diversification Opportunities for Tokyo Electron and Spectra7 Microsystems

-0.33

Correlation Coefficient

Tokyo Electron  Spectra7 Microsystems

Very good diversification

The 3 months correlation between Tokyo and Spectra7 is -0.33. Overlapping area represents the amount of risk that can be diversified away by holding Tokyo Electron and Spectra7 Microsystems in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Spectra7 Microsystems and Tokyo Electron 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 Tokyo Electron are associated (or correlated) with Spectra7 Microsystems. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Spectra7 Microsystems has no effect on the direction of Tokyo Electron i.e., Tokyo Electron and Spectra7 Microsystems go up and down completely randomly.

Pair Corralation between Tokyo Electron and Spectra7 Microsystems

Assuming the 90 days horizon Tokyo Electron is expected to generate 0.41 times more return on investment than Spectra7 Microsystems. However, Tokyo Electron is 2.46 times less risky than Spectra7 Microsystems. It trades about 0.24 of its potential returns per unit of risk. Spectra7 Microsystems is currently generating about -0.12 per unit of risk. If you would invest  14,720  in Tokyo Electron on October 27, 2024 and sell it today you would earn a total of  2,408  from holding Tokyo Electron or generate 16.36% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	90.48%
Values	Daily Returns

Tokyo Electron  vs.  Spectra7 Microsystems

Tokyo Electron

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Tokyo Electron are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain essential indicators, Tokyo Electron reported solid returns over the last few months and may actually be approaching a breakup point.

Spectra7 Microsystems

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Spectra7 Microsystems has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Spectra7 Microsystems is not utilizing all of its potentials. The recent stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Tokyo Electron and Spectra7 Microsystems

The main advantage of trading using opposite Tokyo Electron and Spectra7 Microsystems positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Tokyo Electron position performs unexpectedly, Spectra7 Microsystems 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 Spectra7 Microsystems will offset losses from the drop in Spectra7 Microsystems' long position.

The idea behind Tokyo Electron and Spectra7 Microsystems 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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.