Correlation Between Applied Materials and Tokyo Electron
Can any of the company-specific risk be diversified away by investing in both Applied Materials and Tokyo Electron 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 Applied Materials and Tokyo Electron into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Applied Materials and Tokyo Electron Limited, you can compare the effects of market volatilities on Applied Materials and Tokyo Electron 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 Applied Materials with a short position of Tokyo Electron. Check out your portfolio center. Please also check ongoing floating volatility patterns of Applied Materials and Tokyo Electron.
Diversification Opportunities for Applied Materials and Tokyo Electron
0.73 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Applied and Tokyo is 0.73. Overlapping area represents the amount of risk that can be diversified away by holding Applied Materials and Tokyo Electron Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Tokyo Electron and Applied Materials 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 Applied Materials are associated (or correlated) with Tokyo Electron. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Tokyo Electron has no effect on the direction of Applied Materials i.e., Applied Materials and Tokyo Electron go up and down completely randomly.
Pair Corralation between Applied Materials and Tokyo Electron
Assuming the 90 days horizon Applied Materials is expected to under-perform the Tokyo Electron. But the stock apears to be less risky and, when comparing its historical volatility, Applied Materials is 1.0 times less risky than Tokyo Electron. The stock trades about -0.07 of its potential returns per unit of risk. The Tokyo Electron Limited is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest 14,490 in Tokyo Electron Limited on August 31, 2024 and sell it today you would earn a total of 420.00 from holding Tokyo Electron Limited or generate 2.9% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Applied Materials vs. Tokyo Electron Limited
Performance |
| Timeline |
| Applied Materials |
| Tokyo Electron |
Applied Materials and Tokyo Electron Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Applied Materials and Tokyo Electron
The main advantage of trading using opposite Applied Materials and Tokyo Electron positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Applied Materials position performs unexpectedly, Tokyo Electron 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 Tokyo Electron will offset losses from the drop in Tokyo Electron's long position.| Applied Materials vs. ASML Holding NV | Applied Materials vs. Superior Plus Corp | Applied Materials vs. NMI Holdings | Applied Materials vs. Origin Agritech |
| Tokyo Electron vs. EAT WELL INVESTMENT | Tokyo Electron vs. INTERSHOP Communications Aktiengesellschaft | Tokyo Electron vs. Chunghwa Telecom Co | Tokyo Electron vs. JAPAN TOBACCO UNSPADR12 |
Check out your portfolio center.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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..
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