Correlation Between ONEOK and Applied Materials
Can any of the company-specific risk be diversified away by investing in both ONEOK and Applied Materials 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 ONEOK and Applied Materials into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between ONEOK Inc and Applied Materials, you can compare the effects of market volatilities on ONEOK and Applied Materials 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 ONEOK with a short position of Applied Materials. Check out your portfolio center. Please also check ongoing floating volatility patterns of ONEOK and Applied Materials.
Diversification Opportunities for ONEOK and Applied Materials
0.15 | Correlation Coefficient |
Average diversification
The 3 months correlation between ONEOK and Applied is 0.15. Overlapping area represents the amount of risk that can be diversified away by holding ONEOK Inc and Applied Materials in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Applied Materials and ONEOK 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 ONEOK Inc are associated (or correlated) with Applied Materials. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Applied Materials has no effect on the direction of ONEOK i.e., ONEOK and Applied Materials go up and down completely randomly.
Pair Corralation between ONEOK and Applied Materials
Assuming the 90 days trading horizon ONEOK Inc is expected to under-perform the Applied Materials. But the stock apears to be less risky and, when comparing its historical volatility, ONEOK Inc is 1.96 times less risky than Applied Materials. The stock trades about -0.1 of its potential returns per unit of risk. The Applied Materials is currently generating about 0.16 of returns per unit of risk over similar time horizon. If you would invest 16,789 in Applied Materials on November 4, 2024 and sell it today you would earn a total of 1,846 from holding Applied Materials or generate 11.0% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
ONEOK Inc vs. Applied Materials
Performance |
| Timeline |
| ONEOK Inc |
| Applied Materials |
ONEOK and Applied Materials Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with ONEOK and Applied Materials
The main advantage of trading using opposite ONEOK and Applied Materials positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if ONEOK position performs unexpectedly, Applied Materials 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 Applied Materials will offset losses from the drop in Applied Materials' long position.| ONEOK vs. Universal Display Corp | ONEOK vs. Playtech Plc | ONEOK vs. Cairn Homes PLC | ONEOK vs. Cairo Communication SpA |
| Applied Materials vs. Hochschild Mining plc | Applied Materials vs. Morgan Advanced Materials | Applied Materials vs. AMG Advanced Metallurgical | Applied Materials vs. Fevertree Drinks Plc |
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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.
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