Correlation Between Tokyo Electron and Applied Materials
Can any of the company-specific risk be diversified away by investing in both Tokyo Electron and Applied Materials 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 Applied Materials into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Tokyo Electron and Applied Materials, you can compare the effects of market volatilities on Tokyo Electron and Applied Materials 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 Applied Materials. Check out your portfolio center. Please also check ongoing floating volatility patterns of Tokyo Electron and Applied Materials.
Diversification Opportunities for Tokyo Electron and Applied Materials
0.32 | Correlation Coefficient |
Weak diversification
The 3 months correlation between Tokyo and Applied is 0.32. Overlapping area represents the amount of risk that can be diversified away by holding Tokyo Electron and Applied Materials in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Applied Materials 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 Applied Materials. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Applied Materials has no effect on the direction of Tokyo Electron i.e., Tokyo Electron and Applied Materials go up and down completely randomly.
Pair Corralation between Tokyo Electron and Applied Materials
Assuming the 90 days horizon Tokyo Electron is expected to generate 1.27 times more return on investment than Applied Materials. However, Tokyo Electron is 1.27 times more volatile than Applied Materials. It trades about 0.04 of its potential returns per unit of risk. Applied Materials is currently generating about 0.05 per unit of risk. If you would invest 11,587 in Tokyo Electron on October 25, 2024 and sell it today you would earn a total of 6,023 from holding Tokyo Electron or generate 51.98% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Tokyo Electron vs. Applied Materials
Performance |
| Timeline |
| Tokyo Electron |
| Applied Materials |
Tokyo Electron and Applied Materials Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Tokyo Electron and Applied Materials
The main advantage of trading using opposite Tokyo Electron and Applied Materials positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Tokyo Electron position performs unexpectedly, Applied Materials 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 Applied Materials will offset losses from the drop in Applied Materials' long position.| Tokyo Electron vs. Marfrig Global Foods | Tokyo Electron vs. Astral Foods Limited | Tokyo Electron vs. Inflection Point Acquisition | Tokyo Electron vs. Transcontinental Realty Investors |
| Applied Materials vs. KLA Tencor | Applied Materials vs. ASML Holding NV | Applied Materials vs. Axcelis Technologies | Applied Materials vs. Teradyne |
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 Money Managers module to screen money managers from public funds and ETFs managed around the world.
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