Correlation Between Tokyo Electron and Xperi Corp

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

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

Diversification Opportunities for Tokyo Electron and Xperi Corp

0.59

Correlation Coefficient

Tokyo Electron  Xperi Corp

Very weak diversification

The 3 months correlation between Tokyo and Xperi is 0.59. Overlapping area represents the amount of risk that can be diversified away by holding Tokyo Electron and Xperi Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Xperi Corp and Tokyo Electron 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 Tokyo Electron are associated (or correlated) with Xperi Corp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Xperi Corp has no effect on the direction of Tokyo Electron i.e., Tokyo Electron and Xperi Corp go up and down completely randomly.

Pair Corralation between Tokyo Electron and Xperi Corp

Assuming the 90 days horizon Tokyo Electron is expected to generate 4.76 times less return on investment than Xperi Corp. But when comparing it to its historical volatility, Tokyo Electron is 3.5 times less risky than Xperi Corp. It trades about 0.1 of its potential returns per unit of risk. Xperi Corp is currently generating about 0.14 of returns per unit of risk over similar time horizon. If you would invest  998.00  in Xperi Corp on February 24, 2024 and sell it today you would earn a total of  177.00  from holding Xperi Corp or generate 17.74% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	95.65%
Values	Daily Returns

Tokyo Electron  vs.  Xperi Corp

Tokyo Electron

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Tokyo Electron has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable essential indicators, Tokyo Electron is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Xperi Corp

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Xperi Corp are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Even with relatively invariable technical and fundamental indicators, Xperi Corp is not utilizing all of its potentials. The recent stock price agitation, may contribute to short-term losses for the retail investors.

Pair Trading with Tokyo Electron and Xperi Corp

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

The idea behind Tokyo Electron and Xperi Corp 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 Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.