Correlation Between Applied Materials and GoldMining
Can any of the company-specific risk be diversified away by investing in both Applied Materials and GoldMining 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 GoldMining into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Applied Materials and GoldMining, you can compare the effects of market volatilities on Applied Materials and GoldMining 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 GoldMining. Check out your portfolio center. Please also check ongoing floating volatility patterns of Applied Materials and GoldMining.
Diversification Opportunities for Applied Materials and GoldMining
0.0 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between Applied and GoldMining is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding Applied Materials and GoldMining in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on GoldMining 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 GoldMining. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of GoldMining has no effect on the direction of Applied Materials i.e., Applied Materials and GoldMining go up and down completely randomly.
Pair Corralation between Applied Materials and GoldMining
Assuming the 90 days trading horizon Applied Materials is expected to under-perform the GoldMining. In addition to that, Applied Materials is 1.24 times more volatile than GoldMining. It trades about -0.12 of its total potential returns per unit of risk. GoldMining is currently generating about -0.03 per unit of volatility. If you would invest 127.00 in GoldMining on September 12, 2024 and sell it today you would lose (2.00) from holding GoldMining or give up 1.57% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Flat |
| Strength | Insignificant |
| Accuracy | 65.22% |
| Values | Daily Returns |
Applied Materials vs. GoldMining
Performance |
| Timeline |
| Applied Materials |
| GoldMining |
Applied Materials and GoldMining Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Applied Materials and GoldMining
The main advantage of trading using opposite Applied Materials and GoldMining positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Applied Materials position performs unexpectedly, GoldMining 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 GoldMining will offset losses from the drop in GoldMining'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 |
| GoldMining vs. Hong Kong Land | GoldMining vs. Neometals | GoldMining vs. Coor Service Management | GoldMining vs. Fidelity Sustainable USD |
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 Bond Analysis module to evaluate and analyze corporate bonds as a potential investment for your portfolios..
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