Correlation Between Transphorm Technology and Sumco Corp

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

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

Diversification Opportunities for Transphorm Technology and Sumco Corp

0.08

Correlation Coefficient

Transphorm Technology  Sumco Corp

Significant diversification

The 3 months correlation between Transphorm and Sumco is 0.08. Overlapping area represents the amount of risk that can be diversified away by holding Transphorm Technology 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 Transphorm Technology 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 Transphorm Technology 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 Transphorm Technology i.e., Transphorm Technology and Sumco Corp go up and down completely randomly.

Pair Corralation between Transphorm Technology and Sumco Corp

Given the investment horizon of 90 days Transphorm Technology is expected to generate 1.11 times more return on investment than Sumco Corp. However, Transphorm Technology is 1.11 times more volatile than Sumco Corp ADR. It trades about 0.14 of its potential returns per unit of risk. Sumco Corp ADR is currently generating about -0.01 per unit of risk. If you would invest  242.00  in Transphorm Technology on June 23, 2024 and sell it today you would earn a total of  268.00  from holding Transphorm Technology or generate 110.74% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	75.0%
Values	Daily Returns

Transphorm Technology  vs.  Sumco Corp ADR

Transphorm Technology

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Transphorm Technology has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy basic indicators, Transphorm Technology is not utilizing all of its potentials. The current stock price disarray, may contribute to short-term losses for the investors.

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 October 2024. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with Transphorm Technology and Sumco Corp

The main advantage of trading using opposite Transphorm Technology and Sumco Corp positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Transphorm Technology 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 Transphorm Technology 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.

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 Portfolio Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.