Correlation Between Sumco Corp and Veeco Instruments

Can any of the company-specific risk be diversified away by investing in both Sumco Corp and Veeco Instruments 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 Veeco Instruments 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 Veeco Instruments, you can compare the effects of market volatilities on Sumco Corp and Veeco Instruments 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 Veeco Instruments. Check out your portfolio center. Please also check ongoing floating volatility patterns of Sumco Corp and Veeco Instruments.

Diversification Opportunities for Sumco Corp and Veeco Instruments

0.88

Correlation Coefficient

Sumco Corp  Veeco Instruments

Very poor diversification

The 3 months correlation between Sumco and Veeco is 0.88. Overlapping area represents the amount of risk that can be diversified away by holding Sumco Corp ADR and Veeco Instruments in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Veeco Instruments 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 Veeco Instruments. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Veeco Instruments has no effect on the direction of Sumco Corp i.e., Sumco Corp and Veeco Instruments go up and down completely randomly.

Pair Corralation between Sumco Corp and Veeco Instruments

Assuming the 90 days horizon Sumco Corp ADR is expected to under-perform the Veeco Instruments. In addition to that, Sumco Corp is 1.11 times more volatile than Veeco Instruments. It trades about -0.22 of its total potential returns per unit of risk. Veeco Instruments is currently generating about -0.09 per unit of volatility. If you would invest  3,178  in Veeco Instruments on September 22, 2024 and sell it today you would lose (419.00) from holding Veeco Instruments or give up 13.18% of portfolio value over 90 days.

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

Sumco Corp ADR  vs.  Veeco Instruments

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.

Veeco Instruments

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Veeco Instruments has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest weak performance, the Stock's fundamental indicators remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the firm investors.

Pair Trading with Sumco Corp and Veeco Instruments

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

The idea behind Sumco Corp ADR and Veeco Instruments 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 Equity Search module to search for actively traded equities including funds and ETFs from over 30 global markets.