Correlation Between Superior Plus and Tokyo Electron

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

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

Diversification Opportunities for Superior Plus and Tokyo Electron

0.69

Correlation Coefficient

Superior Plus  Tokyo Electron

Poor diversification

The 3 months correlation between Superior and Tokyo is 0.69. Overlapping area represents the amount of risk that can be diversified away by holding Superior Plus Corp and Tokyo Electron Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Tokyo Electron and Superior Plus 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 Superior Plus Corp 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 Superior Plus i.e., Superior Plus and Tokyo Electron go up and down completely randomly.

Pair Corralation between Superior Plus and Tokyo Electron

Assuming the 90 days horizon Superior Plus is expected to generate 3.76 times less return on investment than Tokyo Electron. But when comparing it to its historical volatility, Superior Plus Corp is 1.37 times less risky than Tokyo Electron. It trades about 0.06 of its potential returns per unit of risk. Tokyo Electron Limited is currently generating about 0.16 of returns per unit of risk over similar time horizon. If you would invest  13,445  in Tokyo Electron Limited on September 16, 2024 and sell it today you would earn a total of  1,420  from holding Tokyo Electron Limited or generate 10.56% return on investment over 90 days.

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

Superior Plus Corp  vs.  Tokyo Electron Limited

Superior Plus Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Superior Plus Corp 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.

Tokyo Electron

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Tokyo Electron Limited has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Tokyo Electron is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Superior Plus and Tokyo Electron

The main advantage of trading using opposite Superior Plus and Tokyo Electron positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Superior Plus 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.

The idea behind Superior Plus Corp and Tokyo Electron Limited 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 ETFs module to find actively traded Exchange Traded Funds (ETF) from around the world.