Correlation Between Advantest and Lasertec

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

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

Diversification Opportunities for Advantest and Lasertec

-0.91

Correlation Coefficient

Advantest  Lasertec

Pay attention - limited upside

The 3 months correlation between Advantest and Lasertec is -0.91. Overlapping area represents the amount of risk that can be diversified away by holding Advantest and Lasertec in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lasertec and Advantest 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 Advantest are associated (or correlated) with Lasertec. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lasertec has no effect on the direction of Advantest i.e., Advantest and Lasertec go up and down completely randomly.

Pair Corralation between Advantest and Lasertec

Assuming the 90 days horizon Advantest is expected to generate 0.88 times more return on investment than Lasertec. However, Advantest is 1.14 times less risky than Lasertec. It trades about 0.22 of its potential returns per unit of risk. Lasertec is currently generating about -0.2 per unit of risk. If you would invest  4,256  in Advantest on September 3, 2024 and sell it today you would earn a total of  1,994  from holding Advantest or generate 46.85% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Significant
Accuracy	98.44%
Values	Daily Returns

Advantest  vs.  Lasertec

Advantest

Risk-Adjusted Performance

17 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Advantest are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Advantest reported solid returns over the last few months and may actually be approaching a breakup point.

Lasertec

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Lasertec has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's fundamental indicators remain fairly strong which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with Advantest and Lasertec

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

The idea behind Advantest and Lasertec 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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.