Correlation Between Applied Materials and National Beverage
Can any of the company-specific risk be diversified away by investing in both Applied Materials and National Beverage 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 National Beverage into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Applied Materials and National Beverage Corp, you can compare the effects of market volatilities on Applied Materials and National Beverage 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 National Beverage. Check out your portfolio center. Please also check ongoing floating volatility patterns of Applied Materials and National Beverage.
Diversification Opportunities for Applied Materials and National Beverage
-0.03 | Correlation Coefficient |
Good diversification
The 3 months correlation between Applied and National is -0.03. Overlapping area represents the amount of risk that can be diversified away by holding Applied Materials and National Beverage Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on National Beverage 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 National Beverage. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of National Beverage Corp has no effect on the direction of Applied Materials i.e., Applied Materials and National Beverage go up and down completely randomly.
Pair Corralation between Applied Materials and National Beverage
Assuming the 90 days trading horizon Applied Materials is expected to generate 2.73 times more return on investment than National Beverage. However, Applied Materials is 2.73 times more volatile than National Beverage Corp. It trades about 0.02 of its potential returns per unit of risk. National Beverage Corp is currently generating about -0.54 per unit of risk. If you would invest 17,187 in Applied Materials on October 12, 2024 and sell it today you would earn a total of 114.00 from holding Applied Materials or generate 0.66% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 95.24% |
| Values | Daily Returns |
Applied Materials vs. National Beverage Corp
Performance |
| Timeline |
| Applied Materials |
| National Beverage Corp |
Applied Materials and National Beverage Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Applied Materials and National Beverage
The main advantage of trading using opposite Applied Materials and National Beverage positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Applied Materials position performs unexpectedly, National Beverage 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 National Beverage will offset losses from the drop in National Beverage's long position.| Applied Materials vs. BE Semiconductor Industries | Applied Materials vs. mobilezone holding AG | Applied Materials vs. Spirent Communications plc | Applied Materials vs. SBM Offshore NV |
| National Beverage vs. Beazer Homes USA | National Beverage vs. AcadeMedia AB | National Beverage vs. Centaur Media | National Beverage vs. Intermediate Capital Group |
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 Content Syndication module to quickly integrate customizable finance content to your own investment portal.
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