Correlation Between Lasertec and Sumco Corp

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

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

Diversification Opportunities for Lasertec and Sumco Corp

0.91

Correlation Coefficient

Lasertec  Sumco Corp

Almost no diversification

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

Pair Corralation between Lasertec and Sumco Corp

Assuming the 90 days horizon Lasertec is expected to under-perform the Sumco Corp. But the pink sheet apears to be less risky and, when comparing its historical volatility, Lasertec is 1.06 times less risky than Sumco Corp. The pink sheet trades about -0.26 of its potential returns per unit of risk. The Sumco Corp ADR is currently generating about -0.15 of returns per unit of risk over similar time horizon. If you would invest  2,177  in Sumco Corp ADR on September 2, 2024 and sell it today you would lose (574.00) from holding Sumco Corp ADR or give up 26.37% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Strong
Accuracy	98.46%
Values	Daily Returns

Lasertec  vs.  Sumco Corp ADR

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. Despite uncertain performance in the last few months, the Stock's fundamental indicators remain nearly stable which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Sumco Corp ADR

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Sumco Corp ADR has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of uncertain performance in the last few months, the Stock's basic 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 Lasertec and Sumco Corp

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

The idea behind Lasertec and Sumco Corp ADR 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 Anywhere module to track or share privately all of your investments from the convenience of any device.