Correlation Between Applied Materials and AES Corp
Can any of the company-specific risk be diversified away by investing in both Applied Materials and AES 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 Applied Materials and AES Corp into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Applied Materials and AES Corp, you can compare the effects of market volatilities on Applied Materials and AES 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 Applied Materials with a short position of AES Corp. Check out your portfolio center. Please also check ongoing floating volatility patterns of Applied Materials and AES Corp.
Diversification Opportunities for Applied Materials and AES Corp
0.73 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Applied and AES is 0.73. Overlapping area represents the amount of risk that can be diversified away by holding Applied Materials and AES Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AES Corp and Applied Materials 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 Applied Materials are associated (or correlated) with AES Corp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of AES Corp has no effect on the direction of Applied Materials i.e., Applied Materials and AES Corp go up and down completely randomly.
Pair Corralation between Applied Materials and AES Corp
Assuming the 90 days trading horizon Applied Materials is expected to generate 1.06 times more return on investment than AES Corp. However, Applied Materials is 1.06 times more volatile than AES Corp. It trades about 0.04 of its potential returns per unit of risk. AES Corp is currently generating about -0.04 per unit of risk. If you would invest 13,375 in Applied Materials on September 12, 2024 and sell it today you would earn a total of 3,801 from holding Applied Materials or generate 28.42% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 99.43% |
| Values | Daily Returns |
Applied Materials vs. AES Corp
Performance |
| Timeline |
| Applied Materials |
| AES Corp |
Applied Materials and AES Corp Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Applied Materials and AES Corp
The main advantage of trading using opposite Applied Materials and AES Corp positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Applied Materials position performs unexpectedly, AES 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 AES Corp will offset losses from the drop in AES Corp's long position.| Applied Materials vs. Hong Kong Land | Applied Materials vs. Neometals | Applied Materials vs. Coor Service Management | Applied Materials vs. Fidelity Sustainable USD |
| AES Corp vs. JB Hunt Transport | AES Corp vs. Alior Bank SA | AES Corp vs. Royal Bank of | AES Corp vs. Erste Group Bank |
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 Top Crypto Exchanges module to search and analyze digital assets across top global cryptocurrency exchanges.
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