Correlation Between Applied Materials and Blackrock World
Can any of the company-specific risk be diversified away by investing in both Applied Materials and Blackrock World 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 Blackrock World into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Applied Materials and Blackrock World Mining, you can compare the effects of market volatilities on Applied Materials and Blackrock World 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 Blackrock World. Check out your portfolio center. Please also check ongoing floating volatility patterns of Applied Materials and Blackrock World.
Diversification Opportunities for Applied Materials and Blackrock World
0.64 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Applied and Blackrock is 0.64. Overlapping area represents the amount of risk that can be diversified away by holding Applied Materials and Blackrock World Mining in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Blackrock World Mining 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 Blackrock World. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Blackrock World Mining has no effect on the direction of Applied Materials i.e., Applied Materials and Blackrock World go up and down completely randomly.
Pair Corralation between Applied Materials and Blackrock World
Assuming the 90 days trading horizon Applied Materials is expected to generate 2.0 times more return on investment than Blackrock World. However, Applied Materials is 2.0 times more volatile than Blackrock World Mining. It trades about 0.07 of its potential returns per unit of risk. Blackrock World Mining is currently generating about -0.05 per unit of risk. If you would invest 16,781 in Applied Materials on October 14, 2024 and sell it today you would earn a total of 520.00 from holding Applied Materials or generate 3.1% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Applied Materials vs. Blackrock World Mining
Performance |
| Timeline |
| Applied Materials |
| Blackrock World Mining |
Applied Materials and Blackrock World Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Applied Materials and Blackrock World
The main advantage of trading using opposite Applied Materials and Blackrock World positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Applied Materials position performs unexpectedly, Blackrock World 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 Blackrock World will offset losses from the drop in Blackrock World's long position.| Applied Materials vs. Universal Music Group | Applied Materials vs. Alliance Data Systems | Applied Materials vs. Datalogic | Applied Materials vs. Automatic Data Processing |
| Blackrock World vs. Martin Marietta Materials | Blackrock World vs. Applied Materials | Blackrock World vs. United States Steel | Blackrock World vs. Impax Environmental Markets |
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 Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.
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