Correlation Between Applied Materials and Silvercorp Metals
Can any of the company-specific risk be diversified away by investing in both Applied Materials and Silvercorp Metals 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 Silvercorp Metals into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Applied Materials and Silvercorp Metals, you can compare the effects of market volatilities on Applied Materials and Silvercorp Metals 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 Silvercorp Metals. Check out your portfolio center. Please also check ongoing floating volatility patterns of Applied Materials and Silvercorp Metals.
Diversification Opportunities for Applied Materials and Silvercorp Metals
0.45 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Applied and Silvercorp is 0.45. Overlapping area represents the amount of risk that can be diversified away by holding Applied Materials and Silvercorp Metals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Silvercorp Metals 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 Silvercorp Metals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Silvercorp Metals has no effect on the direction of Applied Materials i.e., Applied Materials and Silvercorp Metals go up and down completely randomly.
Pair Corralation between Applied Materials and Silvercorp Metals
Assuming the 90 days trading horizon Applied Materials is expected to generate 0.6 times more return on investment than Silvercorp Metals. However, Applied Materials is 1.66 times less risky than Silvercorp Metals. It trades about -0.11 of its potential returns per unit of risk. Silvercorp Metals is currently generating about -0.14 per unit of risk. If you would invest 18,247 in Applied Materials on September 14, 2024 and sell it today you would lose (1,382) from holding Applied Materials or give up 7.57% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 95.45% |
| Values | Daily Returns |
Applied Materials vs. Silvercorp Metals
Performance |
| Timeline |
| Applied Materials |
| Silvercorp Metals |
Applied Materials and Silvercorp Metals Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Applied Materials and Silvercorp Metals
The main advantage of trading using opposite Applied Materials and Silvercorp Metals positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Applied Materials position performs unexpectedly, Silvercorp Metals 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 Silvercorp Metals will offset losses from the drop in Silvercorp Metals' long position.| Applied Materials vs. Verizon Communications | Applied Materials vs. Datagroup SE | Applied Materials vs. bet at home AG | Applied Materials vs. Public Storage |
| Silvercorp Metals vs. Applied Materials | Silvercorp Metals vs. Batm Advanced Communications | Silvercorp Metals vs. Indutrade AB | Silvercorp Metals vs. Wyndham Hotels Resorts |
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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.
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