Correlation Between AIXTRON SE and Tokyo Electron

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

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

Diversification Opportunities for AIXTRON SE and Tokyo Electron

0.69

Correlation Coefficient

AIXTRON SE  Tokyo Electron

Poor diversification

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

Pair Corralation between AIXTRON SE and Tokyo Electron

Assuming the 90 days horizon AIXTRON SE is expected to under-perform the Tokyo Electron. But the pink sheet apears to be less risky and, when comparing its historical volatility, AIXTRON SE is 1.03 times less risky than Tokyo Electron. The pink sheet trades about -0.05 of its potential returns per unit of risk. The Tokyo Electron Ltd is currently generating about -0.02 of returns per unit of risk over similar time horizon. If you would invest  8,433  in Tokyo Electron Ltd on September 13, 2024 and sell it today you would lose (431.00) from holding Tokyo Electron Ltd or give up 5.11% of portfolio value over 90 days.

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

AIXTRON SE  vs.  Tokyo Electron Ltd

AIXTRON SE

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days AIXTRON SE has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak 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 Ltd has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong essential indicators, Tokyo Electron is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with AIXTRON SE and Tokyo Electron

The main advantage of trading using opposite AIXTRON SE and Tokyo Electron positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if AIXTRON SE 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 AIXTRON SE and Tokyo Electron Ltd 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 Portfolio Dashboard module to portfolio dashboard that provides centralized access to all your investments.