Correlation Between Tokyo Electron and ASM International

Can any of the company-specific risk be diversified away by investing in both Tokyo Electron and ASM International 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 ASM International 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 ASM International NV, you can compare the effects of market volatilities on Tokyo Electron and ASM International 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 ASM International. Check out your portfolio center. Please also check ongoing floating volatility patterns of Tokyo Electron and ASM International.

Diversification Opportunities for Tokyo Electron and ASM International

0.56

Correlation Coefficient

Tokyo Electron  ASM International

Very weak diversification

The 3 months correlation between Tokyo and ASM is 0.56. Overlapping area represents the amount of risk that can be diversified away by holding Tokyo Electron Ltd and ASM International NV in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ASM International 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 ASM International. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ASM International has no effect on the direction of Tokyo Electron i.e., Tokyo Electron and ASM International go up and down completely randomly.

Pair Corralation between Tokyo Electron and ASM International

Assuming the 90 days horizon Tokyo Electron Ltd is expected to under-perform the ASM International. In addition to that, Tokyo Electron is 1.41 times more volatile than ASM International NV. It trades about -0.07 of its total potential returns per unit of risk. ASM International NV is currently generating about -0.08 per unit of volatility. If you would invest  78,645  in ASM International NV on October 7, 2024 and sell it today you would lose (20,667) from holding ASM International NV or give up 26.28% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	99.21%
Values	Daily Returns

Tokyo Electron Ltd  vs.  ASM International NV

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 latest fragile performance, the Stock's essential indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

ASM International

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days ASM International NV has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest fragile performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Pair Trading with Tokyo Electron and ASM International

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

The idea behind Tokyo Electron Ltd and ASM International NV 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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.