Correlation Between Sumco Corp and Aehr Test

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

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

Diversification Opportunities for Sumco Corp and Aehr Test

0.18

Correlation Coefficient

Sumco Corp  Aehr Test

Average diversification

The 3 months correlation between Sumco and Aehr is 0.18. Overlapping area represents the amount of risk that can be diversified away by holding Sumco Corp ADR and Aehr Test Systems in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Aehr Test Systems and Sumco Corp 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 Sumco Corp ADR are associated (or correlated) with Aehr Test. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Aehr Test Systems has no effect on the direction of Sumco Corp i.e., Sumco Corp and Aehr Test go up and down completely randomly.

Pair Corralation between Sumco Corp and Aehr Test

Assuming the 90 days horizon Sumco Corp is expected to generate 6.86 times less return on investment than Aehr Test. But when comparing it to its historical volatility, Sumco Corp ADR is 2.39 times less risky than Aehr Test. It trades about 0.07 of its potential returns per unit of risk. Aehr Test Systems is currently generating about 0.21 of returns per unit of risk over similar time horizon. If you would invest  1,270  in Aehr Test Systems on October 1, 2024 and sell it today you would earn a total of  381.00  from holding Aehr Test Systems or generate 30.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	95.24%
Values	Daily Returns

Sumco Corp ADR  vs.  Aehr Test Systems

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 fragile 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.

Aehr Test Systems

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Aehr Test Systems are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Even with relatively weak technical indicators, Aehr Test reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Sumco Corp and Aehr Test

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

The idea behind Sumco Corp ADR and Aehr Test Systems 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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.