Correlation Between Veeco Instruments and AXT

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

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

Diversification Opportunities for Veeco Instruments and AXT

0.58

Correlation Coefficient

Veeco Instruments  AXT

Very weak diversification

The 3 months correlation between Veeco and AXT is 0.58. Overlapping area represents the amount of risk that can be diversified away by holding Veeco Instruments and AXT Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AXT Inc and Veeco Instruments 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 Veeco Instruments are associated (or correlated) with AXT. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of AXT Inc has no effect on the direction of Veeco Instruments i.e., Veeco Instruments and AXT go up and down completely randomly.

Pair Corralation between Veeco Instruments and AXT

Given the investment horizon of 90 days Veeco Instruments is expected to generate 0.42 times more return on investment than AXT. However, Veeco Instruments is 2.41 times less risky than AXT. It trades about 0.05 of its potential returns per unit of risk. AXT Inc is currently generating about 0.0 per unit of risk. If you would invest  1,845  in Veeco Instruments on September 21, 2024 and sell it today you would earn a total of  924.00  from holding Veeco Instruments or generate 50.08% return on investment over 90 days.

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

Veeco Instruments  vs.  AXT Inc

Veeco Instruments

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Veeco Instruments has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unsteady performance in the last few months, the Stock's fundamental indicators remain very healthy which may send shares a bit higher in January 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

AXT Inc

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in AXT Inc are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite fairly unfluctuating basic indicators, AXT demonstrated solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Veeco Instruments and AXT

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

The idea behind Veeco Instruments and AXT Inc 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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.