Correlation Between Tokyo Electron and AIXTRON SE

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

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

Diversification Opportunities for Tokyo Electron and AIXTRON SE

0.72

Correlation Coefficient

Tokyo Electron  AIXTRON SE

Poor diversification

The 3 months correlation between Tokyo and AIXTRON is 0.72. Overlapping area represents the amount of risk that can be diversified away by holding Tokyo Electron Ltd and AIXTRON SE in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AIXTRON SE 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 Ltd 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 Tokyo Electron i.e., Tokyo Electron and AIXTRON SE go up and down completely randomly.

Pair Corralation between Tokyo Electron and AIXTRON SE

Assuming the 90 days horizon Tokyo Electron Ltd is expected to generate 0.79 times more return on investment than AIXTRON SE. However, Tokyo Electron Ltd is 1.27 times less risky than AIXTRON SE. It trades about 0.05 of its potential returns per unit of risk. AIXTRON SE is currently generating about -0.03 per unit of risk. If you would invest  4,879  in Tokyo Electron Ltd on September 18, 2024 and sell it today you would earn a total of  2,871  from holding Tokyo Electron Ltd or generate 58.84% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	85.86%
Values	Daily Returns

Tokyo Electron Ltd  vs.  AIXTRON SE

Tokyo Electron

Risk-Adjusted Performance

0 of 100

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.

AIXTRON SE

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days AIXTRON SE 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 basic indicators remain nearly stable which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with Tokyo Electron and AIXTRON SE

The main advantage of trading using opposite Tokyo Electron and AIXTRON SE positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Tokyo Electron 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 Tokyo Electron Ltd 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 Stocks Directory module to find actively traded stocks across global markets.