Correlation Between Applied Materials and Automatic Data
Can any of the company-specific risk be diversified away by investing in both Applied Materials and Automatic Data 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 Automatic Data into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Applied Materials and Automatic Data Processing, you can compare the effects of market volatilities on Applied Materials and Automatic Data 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 Automatic Data. Check out your portfolio center. Please also check ongoing floating volatility patterns of Applied Materials and Automatic Data.
Diversification Opportunities for Applied Materials and Automatic Data
0.17 | Correlation Coefficient |
Average diversification
The 3 months correlation between Applied and Automatic is 0.17. Overlapping area represents the amount of risk that can be diversified away by holding Applied Materials and Automatic Data Processing in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Automatic Data Processing 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 Automatic Data. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Automatic Data Processing has no effect on the direction of Applied Materials i.e., Applied Materials and Automatic Data go up and down completely randomly.
Pair Corralation between Applied Materials and Automatic Data
Assuming the 90 days trading horizon Applied Materials is expected to generate 1.26 times less return on investment than Automatic Data. In addition to that, Applied Materials is 6.76 times more volatile than Automatic Data Processing. It trades about 0.07 of its total potential returns per unit of risk. Automatic Data Processing is currently generating about 0.61 per unit of volatility. If you would invest 28,665 in Automatic Data Processing on November 5, 2024 and sell it today you would earn a total of 1,768 from holding Automatic Data Processing or generate 6.17% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Applied Materials vs. Automatic Data Processing
Performance |
| Timeline |
| Applied Materials |
| Automatic Data Processing |
Applied Materials and Automatic Data Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Applied Materials and Automatic Data
The main advantage of trading using opposite Applied Materials and Automatic Data positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Applied Materials position performs unexpectedly, Automatic Data 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 Automatic Data will offset losses from the drop in Automatic Data's long position.| Applied Materials vs. Hochschild Mining plc | Applied Materials vs. Morgan Advanced Materials | Applied Materials vs. AMG Advanced Metallurgical | Applied Materials vs. Fevertree Drinks Plc |
| Automatic Data vs. Samsung Electronics Co | Automatic Data vs. Samsung Electronics Co | Automatic Data vs. Toyota Motor Corp | Automatic Data vs. Reliance Industries Ltd |
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 Anywhere module to track or share privately all of your investments from the convenience of any device.
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