Correlation Between ASM International and Advantest

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

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

Diversification Opportunities for ASM International and Advantest

0.55

Correlation Coefficient

ASM International  Advantest

Very weak diversification

The 3 months correlation between ASM and Advantest is 0.55. Overlapping area represents the amount of risk that can be diversified away by holding ASM International NV and Advantest in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Advantest and ASM International 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 ASM International NV are associated (or correlated) with Advantest. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Advantest has no effect on the direction of ASM International i.e., ASM International and Advantest go up and down completely randomly.

Pair Corralation between ASM International and Advantest

Assuming the 90 days horizon ASM International is expected to generate 41.55 times less return on investment than Advantest. But when comparing it to its historical volatility, ASM International NV is 20.74 times less risky than Advantest. It trades about 0.08 of its potential returns per unit of risk. Advantest is currently generating about 0.15 of returns per unit of risk over similar time horizon. If you would invest  7,575  in Advantest on January 25, 2024 and sell it today you would lose (4,258) from holding Advantest or give up 56.21% of portfolio value over 90 days.

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

ASM International NV  vs.  Advantest

ASM International

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in ASM International NV are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, ASM International is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Advantest

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Advantest has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fragile performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in May 2024. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with ASM International and Advantest

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

The idea behind ASM International NV and Advantest 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.

Check out your portfolio center.

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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.